Report of Foreign Issuer (6-k)

Share Name	Share Symbol	Market	Type
	AMEX:PAL	AMEX	Common Stock

	Price Change	% Change	Share Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	0.053				0	01:00:00

SECURITIES AND EXCHANGE COMMISSION

Form 6-K

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

The Securities Exchange Act of 1934


For the month of November, 2015		Commission File Number: 1-15142

NORTH AMERICAN PALLADIUM LTD.

(Name of Registrant)

200 Bay Street

Royal Bank Plaza, South Tower

Suite 2350

Toronto, Ontario

Canada M5J 2J2

(Address of Principal Executive Offices)

Indicate by checkmark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F ¨ Form 40-F x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Indicate by checkmark whether the registrant, by furnishing the information contained in this Form is also thereby furnishing the information to the SEC pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes ¨ Assigned File No. No x

If “Yes” is marked, indicate the file number assigned to the Registrant in connection with Rule 12g3-2(b).

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		NORTH AMERICAN PALLADIUM LTD.

Date:	November 6, 2015	By:	/s/ Christine Napierala
			Christine Napierala
			Interim Vice President, Finance and Chief Financial Officer

EXHIBIT INDEX


Exhibit		Description of Exhibit

1		News Release — “North American Palladium Announces Third Quarter 2015 Results”

2		North American Palladium Third Quarter 2015 Financial Results

3		North American Palladium Third Quarter 2015 Management Discussion and Analysis

4		North American Palladium CEO Certification of Interim Filings

5		North American Palladium CFO Certification of Interim Filings

Exhibit 1

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NEWS RELEASE

North American Palladium Announces Third Quarter 2015 Results

All figures are in Canadian dollars except where noted.

Toronto, Ontario, November 6, 2015 – North American Palladium Ltd. (“NAP” or the “Company”) (TSX: PDL) (OTC MKT: PALDF) today announced financial and operational results for the third quarter ended September 30, 2015 from its Lac des Iles palladium mine (“LDI”) in northern Ontario.

Q3 2015 Results Summary

•

Produced 57,914 ounces of payable palladium, a 78% increase compared to the same period in 2014, at a cash cost per ounce⁽¹⁾ of US$522.

•

Revenue of $64.7 million, increased $18.3 million or 39% compared to the same period in 2014. Adjusted EBITDA⁽¹⁾ of $9.1 million, an increase of $0.8 million compared to $8.3 million for the same period in 2014.

•

Underground mining operations produced 356,680 tonnes (3,877 tonnes per day) at a grade of 4.1 g/t palladium, an increase of 51,880 tonnes or 17% in the same quarter in 2014.

•

The LDI mill processed 659,800 tonnes of blended feed at an average grade of 3.6 g/t palladium with a 83.4% recovery rate, compared with 566,494 tonnes at a 2.4 g/t palladium in the same quarter of 2014.

•

The Company completed a recapitalization transaction (“Recapitalization”) on August 6, 2015 which reduced the carrying value of the Company’s debt by $359.8 million and completed the September 15, 2015 issuance of 8.6 million common shares by way of a Rights Offering to raise cash proceeds of $49.6 million, net of transaction costs.

•

Total debt decreased to $43.7 million as at September 30, 2015, improving the Company’s debt to equity ratio to 0.09:1, compared to $405.4 million as at June 30, 2015 with a debt to equity ratio of 4.38:1.

“This was a key quarter for the Company,” said Jim Gallagher, President and CEO. “With the sponsorship of Brookfield Capital Partners, we recapitalized the balance sheet and raised $50 million of equity. We made some difficult but necessary decisions to reduce costs at both our Toronto head office and at the mine site. Our operations performed well but can still do better following the return to regular production after a difficult second quarter. We continue to meet our commitments in the area of health, safety and the environment. At the end of September, we modified our operating strategy to respond to a weaker price environment and ceased processing of low grade stockpiled ore. We are focused on profitability and creating long term value for our shareholders.”

Financial Update⁽²⁾

Q3 2015

Revenue for the third quarter was $64.7 million compared to $46.4 million in the third quarter of 2014. The increase in revenue was primarily due to higher than forecast mill feed grades that reflected the

large tonnage of stockpiled underground ore that was processed. During the third quarter, the Company realized a palladium selling price of US$667 per ounce.

Net loss for the quarter was $68.5 million or $2.18 per share compared to a net loss of $18.8 million or $19.56 per share in the same quarter last year. The increase in the net loss is primarily due to a $28.3 million non-cash loss relating to the fair value of the Company’s common shares having a higher value than the carrying value of the debt that was settled at the time of recapitalization, and the impact of an $19.0 million increased foreign exchange loss related to US$ denominated debt.

Adjusted EBITDA⁽¹⁾ (which excludes income and mining tax expense, interest and other income, interest costs, debt revaluation and other costs, financing costs, depreciation and amortization, exploration, foreign exchange gains and losses, loss on recapitalization, severance payments, and mine restoration and mitigation costs) was $9.1 million in the third quarter, compared to $8.3 million in third quarter last year.

Financial Liquidity

As at September 30, 2015, the Company had cash and cash equivalents of $16.1 million compared to $21.2 million as at June 30, 2015.

On September 18, 2015, the US$25 million bridge loan with Brookfield was repaid except for a nominal amount.

As at September 30, 2015, the Company had total debt of $43.7 million compared to $405.4 million as at June 30, 2015, a decrease of $361.7 million. The company’s debt to equity ratio improved to 0.09:1 as compared to 4.38:1 as at June 30, 2015.

Lac des Iles Operations

Q3 2015 Production

In the third quarter of 2015, the Company’s LDI mine produced 57,914 ounces of payable palladium at a total cash cost of US$522 per ounce⁽¹⁾compared to 32,560 ounces of payable palladium at a cash cost of US$589 in the same period in 2014. The decrease in cash cost in the third quarter of 2015 was mostly due to the impact of the mill processing primarily underground ore for the majority of the third quarter.

During the third quarter, the LDI mill processed 659,817 tonnes of ore at an average palladium grade of 3.6 grams per tonne and at an 83.4% palladium recovery rate. The mill shutdown in the second quarter of 2015 did not impact underground operations, resulting in the higher grade underground stockpile accumulating to approximately 225,000 tonnes. Underground tonnage mined was slightly lower than plan in the third quarter due to seismic activity in pillars adjacent to current mining activity. Although seismic activity is not unexpected in the mining plan the stoping sequence had to change and additional rehabilitation has been required.

Production costs per tonne milled in the three months ended September 30, 2015 were $68 compared to $53 in the same period in 2014. The increase was primarily due to mining greater quantities of underground ore, reagent use and increased power costs.

Underground mining in the third quarter of 2015 consisted of 356,680 tonnes (3,877 tonnes per day) at an average grade of 4.1 g/t palladium compared to 304,804 tonnes (3,313 tonnes per day) at an average palladium grade of 4.0 g/t in the same period in the prior year. In the third quarter of 2015, 86,632 tonnes of the low grade surface stockpile and tailings at an average grade of 1.3 g/t palladium

was processed compared to 270,860 tonnes at an average grade of 1.1 g/t in the prior same period in 2014.

Exploration

Exploration expenditures for the three months ended September 30, 2015 were $1.3 million compared to $2.6 million in the same period in 2014. This difference reflects a suspension of drilling activities from May through August coinciding with the company’s Recapitalization. Exploration drilling at LDI resumed in September with a total of 2,730 metres drilled in the third quarter. In the fourth quarter the Company expects to complete approximately 10,000 metres of underground drilling and 5,000 metres of surface drilling at LDI. Current exploration priorities include resource delineation drilling on the southern and northern extensions to the Offset Zone and extension drilling on several palladium mineralized trends located adjacent to the Roby open pit. A detailed report of the September-December 2015 exploration drilling results is expected to be released in January 2016.

Recapitalization and Rights Offering Update

On August 6, 2015 the Company completed the Recapitalization led by Brookfield Capital Partners Ltd. (“Brookfield”) following formal approval of the transaction by shareholders and debenture holders in votes held on July 30, 2015. The Recapitalization significantly reduced the Company’s debt and enhanced the Company’s liquidity.

On September 15, 2015, the Company completed the Rights Offering raising gross proceeds of approximately $50 million. These funds were used to repay the US$25 million bridge loan, except for a nominal amount, with Brookfield and to fund ongoing operations.

Upon completion of the Rights Offering, Brookfield retained an approximate 92% ownership of the Company’s issued common shares.

Additional information regarding the Recapitalization transaction is included in the Company’s management proxy circular dated September 30, 2015 that is filed with the provincial securities regulatory authorities and SEC and can be obtained at www.sedar.com or www.sec.gov.

Water Balance Update

Milling operations at the Lac des Iles site were shut down from May 11 to June 26, 2015 due to a buildup of excess water behind the Company’s tailings management facility. This required a controlled discharge of reclaim water to the environment with oversight from the Ontario Ministry of the Environment and Climate Change (“MOECC”). Ongoing monitoring indicates that the water quality in the downstream water bodies has returned to background levels that existed before the discharge occurred and no detrimental effects to the natural environment have been noted. The company has implemented an enhanced monitoring and remediation plan in consultation with First Nations groups and the MOECC to identify and mitigate against potential long term impacts. Orders issued at the time of the discharge by the MOECC have all been complied with and have subsequently been revoked.

Technical Information and Qualified Persons

Dr. Dave Peck, the Company’s Vice President, Exploration and a Qualified Person under National Instrument 43-101, has reviewed and approved all technical items disclosed in this news release.

About North American Palladium

NAP is an established precious metals producer that has been operating its Lac des Iles mine (“LDI”) located in Ontario, Canada since 1993. LDI is one of only two primary producers of palladium in the world, offering investors exposure to palladium. The Company’s shares trade on the TSX under the symbol PDL and on the OTC Pink under the symbol PALDF.

For further information, please contact:

North American Palladium Ltd.

Christine Napierala

Interim Vice President, Finance & CFO

807-622-8833 Ext. 3002

cnapierala@nap.com

Notes:

(1)

Non-IFRS measure. Please refer to Non-IFRS Measures in the MD&A.

(2)

NAP’s unaudited interim condensed consolidated financial statements for the quarter ended September 30, 2015 are available in the Appendix of this news release. These financial statements should be read in conjunction with the notes and management’s discussion and analysis available at www.nap.com, www.sedar.com and www.sec.gov.

Cautionary Statement on Forward-Looking Information

Certain information contained in this news release constitutes ‘forward-looking statements’ within the meaning of the ‘safe harbor’ provisions of Canadian securities laws and the United States Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. The words ‘target’, ‘plan’, ‘should’, ‘could’, ‘estimate’, ‘guidance’, and similar expressions identify forward-looking statements. Forward-looking statements in this news release include, without limitation: information pertaining to the Company’s strategy, plans or future financial or operating performance, such as statements with respect to, long term fundamentals for the business, operating performance expectations, project timelines, production forecasts, operating and capital cost estimates, expected mining and milling rates, cash balances, projected grades, mill recoveries, metal price and foreign exchange rates and other statements that express management’s expectations or estimates of future performance. Forward-looking statements involve known and unknown risk factors that may cause the actual results to be materially different from those expressed or implied by the forward-looking statements. Such risks include, but are not limited to: the possibility that metal prices and foreign exchange rates may fluctuate, the risk that the LDI mine may not perform as planned, that the Company may not be able to meet production forecasts, the possibility that the Company may not be able to generate sufficient cash to service its indebtedness and may be forced to take other actions, inherent risks associated with development, exploration, mining and processing including environmental risks and risks to tailings capacity, employment disruptions, including in connection with collective agreements between the Company and unions, the risks associated with obtaining necessary licenses and permits and uncertainty regarding the ability to consummate the Recapitalization. For more details on these and other risk factors see the Company’s most recent Annual Information Form / Form 40-F on file with Canadian provincial securities regulatory authorities and the SEC.

Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions contained in this news release, which may prove to be incorrect, include, but are not limited to: that the Company will be able to continue normal business operations at its Lac des Iles mine, that metal prices and exchange rates between the Canadian and United States dollar will be consistent with the Company’s expectations, that there will be no significant disruptions affecting operations, and that prices for key mining and construction supplies, including labour, will remain consistent with the Company’s expectations. The forward-looking statements are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise, except as expressly required by law. Readers are cautioned not to put undue reliance on these forward-looking statements.

Condensed Interim Consolidated Balance Sheets

(expressed in millions of Canadian dollars)

(unaudited)


	September 30 2015			December 31 2014
ASSETS
Current Assets
Cash and cash equivalents	$	16.1		$	4.1
Accounts receivable		61.1			75.4
Inventories		14.8			14.9
Other assets		2.8			3.6

Total Current Assets		94.8			98.0

Non-current Assets
Mining interests		454.5			452.8

Total Non-current Assets		454.5			452.8

Total Assets	$	549.3		$	550.8

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	26.9		$	28.8
Credit facilities		27.8			36.8
Current portion of obligations under finance leases		5.3			4.6
Current portion of long-term debt		—			7.3

Total Current Liabilities		60.0			77.5

Non-current Liabilities
Income taxes payable		0.1			0.1
Asset retirement obligations		16.5			15.8
Obligations under finance leases		10.6			14.2
Long-term debt		—			218.8

Total Non-current Liabilities		27.2			248.9

Shareholders’ Equity
Common share capital and purchase warrants		1,313.0			866.4
Stock options and related surplus		10.3			9.7
Equity component of convertible debentures, net of issue costs		—			6.9
Contributed surplus		8.9			8.9
Deficit		(870.1	)		(667.5	)

Total Shareholders’ Equity		462.1			224.4

Total Liabilities and Shareholders’ Equity	$	549.3		$	550.8

Condensed Interim Consolidated Statements of Operations and

Comprehensive Loss

(expressed in millions of Canadian dollars, except share and per share amounts)

(unaudited)


	Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014
Revenue	$	64.7		$	46.4		$	156.0		$	145.7


Mining operating expenses
Production costs		44.9			30.1			112.1			90.2
Smelting, refining and freight costs		6.8			4.0			16.2			12.3
Royalty expense		2.7			1.8			6.2			6.0
Depreciation and amortization		10.8			6.9			24.0			25.4
Inventory pricing adjustment		—			—			0.5			—
Loss on disposal of equipment		0.3			0.1			0.2			1.4
Mine restoration and mitigation costs		2.4			—			6.1			—

Total mining operating expenses		67.9			42.9			165.3			135.3

Income (loss) from mining operations		(3.2	)		3.5			(9.3	)		10.4


Other expenses (income)
Exploration		1.3			2.6			5.6			5.2
General and administration		4.6			2.1			9.6			7.3
Interest and other income		(0.1	)		(1.5	)		(1.1	)		(3.9	)
Interest costs, prepayment fee and other		10.0			10.2			103.5			39.2
Financing costs		2.2			(0.9	)		10.1			7.5
Foreign exchange loss (gain)		19.0			9.8			37.3			10.5
Loss on recapitalization		28.3			—			28.3			—

Total other expenses, net		65.3			22.3			193.3			65.8

Loss before taxes		(68.5	)		(18.8	)		(202.6	)		(55.4	)
Income tax recovery		—			—			—			—

Loss and comprehensive loss for the period	$	(68.5	)	$	(18.8	)	$	(202.6	)	$	(55.4	)

Loss per share
Basic and Diluted	$	(2.18	)	$	(19.56	)	$	(18.04	)	$	(68.64	)

Weighted average number of shares outstanding
Basic and Diluted		31,392,831			961,081			11,229,418			807,106

Condensed Interim Consolidated Statements of Cash Flows

(expressed in millions of Canadian dollars)

(unaudited)


	Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014
Cash provided by (used in) Operations
Loss for the period	$	(68.5	)	$	(18.8	)	$	(202.6	)	$	(55.4	)
Operating items not involving cash
Depreciation and amortization		10.8			6.9			24.0			25.4
Inventory pricing adjustment		—			—			0.5			—
Accretion expense		4.1			1.7			10.5			1.3
Share-based compensation and employee benefits		0.4			0.5			0.9			1.6
Unrealized foreign exchange loss (gain)		1.7			8.0			4.8			8.5
Realized foreign exchange on financing activities		12.9						31.5
Loss on disposal of equipment		0.3			0.1			0.2			1.4
Interest expense and other		5.8			7.0			91.9			32.9
Financing costs (recovery)		2.2			(0.9	)		10.1			7.5
Loss on recapitalization		28.3			—			28.3			—

		(2.0	)		4.5			0.1			23.2
Changes in non-cash working capital		(12.0	)		3.5			13.1			(35.7	)

		(14.0	)		8.0			13.2			(12.5	)

Financing Activities
Issuance of convertible debentures, net of issue costs		—			(0.2	)		—			61.2
Issuance of common shares, net of issue costs		49.6			—			49.6			—
Proceeds of credit facilities		10.2			—			47.8			5.5
Repayment of credit facilities		(12.2	)		(0.6	)		(31.5	)		—
Repayment of bridge loan		(17.6	)		—			—			—
Repayment of obligations under finance leases		(1.3	)		(0.9	)		(3.6	)		(2.6	)
Interest paid		(4.5	)		(32.2	)		(27.6	)		(33.8	)
Other financing costs		(3.0	)		(0.8	)		(10.9	)		(1.7	)

		21.2			(34.7	)		23.8			28.6

Investing Activities
Additions to mining interests, net		(12.3	)		(5.8	)		(25.6	)		(14.3	)
Proceeds on disposal of mining interests, net		—			—			0.6			0.2

		(12.3	)		(5.8	)		(25.0	)		(14.1	)

Increase (decrease) in cash		(5.1	)		(32.5	)		12.0			2.0
Cash and cash equivalents, beginning of the period		21.2			44.3			4.1			9.8

Cash and cash equivalents, end of the period		16.1		$	11.8			16.1		$	11.8

Cash and cash equivalents consisting of:
Cash	$	16.1		$	11.8		$	16.1		$	11.8

Foreign exchange included in cash balance	$	0.9		$	0.6		$	0.9		$	0.6

Exhibit 2

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North American Palladium Ltd.

Condensed Interim Consolidated Balance Sheets

(expressed in millions of Canadian dollars)

(unaudited)


			September 30			December 31
	Notes		2015			2014
ASSETS
Current Assets
Cash and cash equivalents			$	16.1		$	4.1
Accounts receivable		4		61.1			75.4
Inventories		5		14.8			14.9
Other assets		6		2.8			3.6

Total Current Assets				94.8			98.0

Non-current Assets
Mining interests		7		454.5			452.8

Total Non-current Assets				454.5			452.8

Total Assets			$	549.3		$	550.8

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities			$	26.9		$	28.8
Credit facilities		9		27.8			36.8
Current portion of obligations under finance leases		10		5.3			4.6
Current portion of long-term debt		11		—			7.3

Total Current Liabilities				60.0			77.5

Non-current Liabilities
Income taxes payable				0.1			0.1
Asset retirement obligations		8		16.5			15.8
Obligations under finance leases		10		10.6			14.2
Long-term debt		11		—			218.8

Total Non-current Liabilities				27.2			248.9

Shareholders’ Equity
Common share capital and purchase warrants		12		1,313.0			866.4
Stock options and related surplus				10.3			9.7
Equity component of convertible debentures, net of issue costs		11		—			6.9
Contributed surplus				8.9			8.9
Deficit				(870.1	)		(667.5	)

Total Shareholders’ Equity				462.1			224.4

Total Liabilities and Shareholders’ Equity			$	549.3		$	550.8

Nature of operations, going concern, and recapitalization – Note 1

Commitments – Note 14

Related Party – Note 18

See accompanying notes to the condensed interim consolidated financial statements

Third Quarter Report 2015

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North American Palladium Ltd.

Condensed Interim Consolidated Statements of Operations and

Comprehensive Loss

(expressed in millions of Canadian dollars, except share and per share amounts)

(unaudited)


			Three months ended September 30						Nine months ended September 30
	Notes		2015			2014			2015			2014
Revenue		15	$	64.7		$	46.4		$	156.0		$	145.7


Mining operating expenses
Production costs				44.9			30.1			112.1			90.2
Smelting, refining and freight costs				6.8			4.0			16.2			12.3
Royalty expense				2.7			1.8			6.2			6.0
Depreciation and amortization				10.8			6.9			24.0			25.4
Inventory pricing adjustment				—			—			0.5			—
Loss on disposal of equipment				0.3			0.1			0.2			1.4
Mine restoration and mitigation costs				2.4			—			6.1			—

Total mining operating expenses				67.9			42.9			165.3			135.3

Income (loss) from mining operations				(3.2	)		3.5			(9.3	)		10.4


Other expenses (income)
Exploration				1.3			2.6			5.6			5.2
General and administration				4.6			2.1			9.6			7.3
Interest and other income		16		(0.1	)		(1.5	)		(1.1	)		(3.9	)
Interest costs, prepayment fee and other		16		10.0			10.2			103.5			39.2
Financing costs				2.2			(0.9	)		10.1			7.5
Foreign exchange loss				19.0			9.8			37.3			10.5
Loss on recapitalization		1, 12(b)		28.3			—			28.3			—

Total other expenses, net				65.3			22.3			193.3			65.8

Loss before taxes				(68.5	)		(18.8	)		(202.6	)		(55.4	)
Income tax recovery				—			—			—			—

Loss and comprehensive loss for the period			$	(68.5	)	$	(18.8	)	$	(202.6	)	$	(55.4	)

Loss per share
Basic and Diluted		12(f)	$	(2.18	)	$	(19.56	)	$	(18.04	)	$	(68.64	)

Weighted average number of shares outstanding
Basic and Diluted		12(f)		31,392,831			961,081			11,229,418			807,106

See accompanying notes to the condensed interim consolidated financial statements

Third Quarter Report 2015

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North American Palladium Ltd.

Condensed Interim Consolidated Statements of Cash Flows

(expressed in millions of Canadian dollars)

(unaudited)


			Three months ended September 30						Nine months ended September 30
	Notes		2015			2014			2015			2014
Cash provided by (used in) Operations
Loss for the period			$	(68.5	)	$	(18.8	)	$	(202.6	)	$	(55.4	)
Operating items not involving cash
Depreciation and amortization				10.8			6.9			24.0			25.4
Inventory pricing adjustment				—			—			0.5			—
Accretion expense		16		4.1			1.7			10.5			1.3
Share-based compensation and employee benefits		12(h)		0.4			0.5			0.9			1.6
Unrealized foreign exchange loss (gain)				1.7			8.0			4.8			8.5
Realized foreign exchange on financing activities				12.9			—			31.5			—
Loss on disposal of equipment				0.3			0.1			0.2			1.4
Interest expense and other				5.8			7.0			91.9			32.9
Financing costs (recovery)				2.2			(0.9	)		10.1			7.5
Loss on recapitalization		1, 12(b)		28.3			—			28.3			—

				(2.0	)		4.5			0.1			23.2
Changes in non-cash working capital		17		(12.0	)		3.5			13.1			(35.7	)

				(14.0	)		8.0			13.2			(12.5	)

Financing Activities
Issuance of convertible debentures, net of issue costs		11		—			(0.2	)		—			61.2
Issuance of common shares, net of issue costs		12(c)		49.6			—			49.6			—
Proceeds of credit facilities		9		10.2			—			47.8			5.5
Repayment of credit facilities		9		(12.2	)		(0.6	)		(31.5	)		—
Repayment of bridge loan		11		(17.6	)		—			—			—
Repayment of obligations under finance leases		10		(1.3	)		(0.9	)		(3.6	)		(2.6	)
Interest paid				(4.5	)		(32.2	)		(27.6	)		(33.8	)
Other financing costs				(3.0	)		(0.8	)		(10.9	)		(1.7	)

				21.2			(34.7	)		23.8			28.6

Investing Activities
Additions to mining interests, net		7		(12.3	)		(5.8	)		(25.6	)		(14.3	)
Proceeds on disposal of mining interests, net				—			—			0.6			0.2

				(12.3	)		(5.8	)		(25.0	)		(14.1	)

Increase (decrease) in cash				(5.1	)		(32.5	)		12.0			2.0
Cash and cash equivalents, beginning of the period				21.2			44.3			4.1			9.8

Cash and cash equivalents, end of the period				16.1		$	11.8			16.1		$	11.8

Cash and cash equivalents consisting of:
Cash			$	16.1		$	11.8		$	16.1		$	11.8

Foreign exchange included in cash balance			$	0.9		$	0.6		$	0.9		$	0.6

See accompanying notes to the condensed interim consolidated financial statements

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North American Palladium Ltd.

Condensed Interim Consolidated Statements of Shareholders’ Equity

(expressed in millions of Canadian dollars, except share amounts)

(unaudited)


	Notes		Number of shares			Capital stock		Stock options		Equity component of convertible debentures			Contributed surplus		Deficit			Total shareholders’ equity

Balance, January 1, 2014				197,109,924		$	798.4	$	9.1	$	6.9		$	8.9	$	(600.8	)	$	222.5

Common shares issued:
Pursuant to conversion of convertible debentures (Series 1)		11		76,407,816			30.9		—		—			—		—			30.9
Pursuant to conversion of convertible debentures (Series 2)		11		108,972,404			35.7		—		—			—		—			35.7

Stock based compensation:
Stock-based compensation		12(d)(h)		2,452,776			1.1		0.5		—			—		—			1.6

Net loss and comprehensive loss for the period ended September 30, 2014				—			—		—		—			—		(55.5	)		(55.5	)

Balance, September 30, 2014				384,942,920			866.1		9.6		6.9			8.9		(656.3	)		235.2




Balance, January 1, 2015				386,514,777		$	866.4	$	9.7	$	6.9		$	8.9	$	(667.5	)	$	224.4

Common shares issued:
Pursuant to conversion of debts payable to Brookfield Capital Partners Ltd. (“Brookfield”)		11, 12(b)		18,214,401,868			364.3		—		—			—		—			364.3
Pursuant to conversion of 2012 convertible debentures		11, 12(b)		1,181,002,018			30.5		—		(6.9	)		—		—			23.6
Pursuant to conversion of 2014 convertible debentures (Series 1 & 2)		11, 12(b)		12,151,926			1.8		—		—			—		—			1.8
Pursuant to conversion of restricted share units		12(g)		2,274,717			0.1		—		—			—		—			0.1

Share consolidation (400:1)		12(b)		(19,748,767,244	)		—		—		—			—		—			—

Pursuant to rights offering, net of issue costs		12(c)		8,630,870			49.6		—		—			—		—			49.6

Stock based compensation:
Stock-based compensation		12(d)(h)		1,917,594			0.3		0.6		—			—		—			0.9

Net loss and comprehensive loss for the period ended September 30, 2015				—			—		—		—			—		(202.6	)		(202.6	)


Balance, September 30, 2015				58,126,526		$	1,313.0	$	10.3	$	—		$	8.9	$	(870.1	)	$	462.1

See accompanying notes to the condensed interim consolidated financial statements

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North American Palladium Ltd.

Notes to the Condensed Interim Consolidated Financial Statements

(expressed in millions of Canadian dollars, except per share amounts and metal prices)

1.	NATURE OF OPERATIONS, GOING CONCERN, AND RECAPITALIZATION

North American Palladium Ltd. (“NAP”) is domiciled in Canada and was incorporated on September 12, 1991 under the Canadian Business Corporations Act. The address of the Company’s registered office is 200 Bay Street, Suite 2350, Royal Bank Plaza South Tower, Toronto, Ontario, Canada, M5J 2J2. The Company’s 100%-owned subsidiary is Lac des Iles Mines Ltd. (“LDI”).

NAP operates the LDI palladium mine, located northwest of Thunder Bay, Ontario, which started producing palladium in 1993. The Company has transitioned the LDI mine from mining via ramp access to mining via shaft while utilizing bulk mining methods.

The condensed interim consolidated financial statements for the Company include the Company and its subsidiary (collectively referred to as the “Company”).

During the three months ended September 30, 2015, a 92% ownership in NAP was acquired by Brookfield Capital Partners Ltd. (“Brookfield”). The details of the transaction are noted below. NAP’s parent company, Brookfield, is a 100% owned subsidiary of Brookfield Asset Management Inc. (“BAM”) which is publicly listed on the New York, Toronto and Euronext stock exchanges. Refer to note 18.

On June 18, 2015 the Company entered into an agreement with Brookfield, its senior secured term loan lender, aimed at significantly reducing the Company’s debt and enhancing the Company’s liquidity (the “Recapitalization”). On July 30, 2015, the Recapitalization received shareholder approval and was completed on August 6, 2015, resulting in the following:

•

Cash settlement of all accrued interest owing to debtors at August 6, 2015 regarding the debt balances noted below immediately prior to conversion of the principal balances under the Recapitalization;

•

Conversion of all the outstanding principal amounts owing to Brookfield into equity, other than the bridge loan facility (“Bridge Loan”), resulting in Brookfield owning common shares representing 92% of the common shares outstanding on a fully-diluted basis after giving effect to the Recapitalization, but prior to the rights offering;

•

Conversion of the outstanding principal relating to the 2012 and 2014 convertible debentures into equity, resulting in holders of convertible debentures owning common shares representing in aggregate 6% of the common shares outstanding on a fully diluted basis after giving effect to the Recapitalization, but prior to the rights offering described below;

•

Existing holders of common shares own 2% of the post-Recapitalization common shares outstanding on a fully diluted basis after giving effect to the Recapitalization, but prior to the rights offering;

•

The Company’s outstanding restricted share units were converted into common shares;

•

The Company’s outstanding warrants and options were terminated;

•

The common shares issued and outstanding were consolidated on the basis of one common share in the capital of the Company for every 400 existing common shares

Refer to notes 9, 11, 12(b), and 12(c) for additional details regarding the Recapitalization and the rights offering and note 18 for related party disclosures.

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North American Palladium Ltd.

These condensed interim consolidated financial statements have been prepared on a going concern basis which contemplates that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. The Company’s credit facility (note 9), which was almost fully drawn on September 30, 2015, expires on November 30, 2015. The Company utilizes its credit facility as needed to both supplement shortfalls in cash flow from operations and to fund certain capital expenditures, and as a result the Company will need to renew or replace its credit facility. The Company’s credit facility contains several financial covenants, which, if not met would result in an event of default. Certain events of default entitle the lender to demand repayment.

Management has estimated that the Company’s existing cash resources and forecasted cash flow from operations for the year ending December 31, 2016 will not be sufficient to fund forecasted capital expenditures, and consequently the Company will need to seek additional financing, in addition to renewing or replacing its existing credit facility. The Company’s cash flow from operations is dependent on a number of variables which cannot be predicted with certainty, including, but not limited to, meeting production targets, metal prices and operational costs. While the Company is pursuing various financing alternatives, the certainty of completing sufficient financing arrangements on terms acceptable to the Company cannot be assured at this time. Accordingly, these conditions have resulted in a material uncertainty that casts substantial doubt about the Company’s ability to continue as a going concern. The condensed interim consolidated financial statements do not include adjustments to the carrying values of recorded assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

2.	BASIS OF PRESENTATION

Statement of Compliance

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of these financial statements, including IAS 34, Interim Financial Reporting.

These condensed interim consolidated financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2014, which have been prepared in accordance with IFRS as issued by the IASB.

Basis of Measurement

These condensed interim consolidated financial statements have been prepared on the historical cost basis, except for the following items in the consolidated balance sheet:

(i)

Accounts receivable are measured at fair value.

(ii)

Financial instruments at fair value through profit or loss are measured at fair value.

(iii)

Liabilities for cash-settled share-based payment arrangements are measured at fair value.

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies disclosed in the Company’s annual financial statements for the year ended December 31, 2014 have been applied consistently by all Company entities for all periods presented in these condensed interim consolidated financial statements.

Basis of Consolidation

These condensed interim consolidated financial statements include the accounts of NAP and its wholly-owned subsidiary.

Adoption of New Accounting Standards

There have been no new accounting standards adopted by the Company for the nine month period ended September 30, 2015.

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North American Palladium Ltd.

New standards not yet adopted

The following new standards or amendments to standards are not yet effective or have otherwise not yet been adopted by the Company.

IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortization

This pronouncement amends IAS 16 Property Plant and Equipment and IAS 38 Intangible Assets to (i) clarify that the use of a revenue-based depreciation method is not appropriate for property, plant and equipment, and (ii) provide a rebuttable presumption for intangible assets. The amendment is effective for years beginning on or after January 1, 2016. This amendment is not expected to have a material impact on the consolidated financial statements of the Company.

IFRS 15 Revenue from contracts with customers

This new standard on revenue recognition supercedes IAS 18 Revenue, IAS 11 Construction Contracts, and related interpretations. The amendment is effective for years beginning on or after January 1, 2018. The Company is presently evaluating the potential impact of this new standard on the consolidated financial statements of the Company.

IFRS 9 Financial Instruments: Classification and Measurement

On July 24, 2014 the IASB issued the complete IFRS 9 (IFRS 9 (2014)) which will replace IAS 39, Financial Instruments: Recognition and Measurement.

IFRS 9 (2014) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2014), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. This includes the introduction of a third measurement category for financial assets – fair value through other comprehensive income.

Special transitional requirements have been set for the application of the new general hedging model.

IFRS 9 (2014) includes finalized guidance on the classification and measurement of financial assets. The final standard also amends the impairment model by introducing a new ‘expected credit loss’ model for calculating impairment, and new general hedge accounting requirements.

The mandatory effective date of IFRS 9 is for annual periods beginning on or after January 1, 2018 and must be applied retrospectively with some exemptions. Early adoption is permitted. The restatement of prior periods is not required and is only permitted if information is available without the use of hindsight. The Company is presently evaluating the impact of adopting this standard.

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North American Palladium Ltd.

4.	ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:


	At September 30		At December 31
	2015		2014
Accounts receivable	$	61.1	$	75.2
Unrealized gain on financial contracts¹		—		0.2

Accounts receivable	$	61.1	$	75.4

¹	As at September 30, 2015, no past palladium production, delivered and sold to a smelter, was priced using forward prices for the month of final settlement (December 31, 2014 – 12,800 ounces of past palladium production at an average price of $942 per ounce).

Accounts receivable represents the value of all platinum group metals (“PGMs”), gold and certain base metals contained in LDI’s concentrate shipped for smelting and refining, using the September 30, 2015 forward metal prices and foreign exchange rates applicable for the month of final settlement, and for which significant risks and rewards have transferred to third parties.

All of the accounts receivable are due from four customers at September 30, 2015 (December 31, 2014 – two customers). A reserve for doubtful accounts has not been established, as in the opinion of management, the amount due will be fully collected. The Company is not economically dependent on its customers, refer to note 15.

First priority security of accounts receivable, supplies inventory, and inventories of concentrate, crushed and broken ore and second priority security on the property, plant and equipment have been pledged as security against a credit facility described in note 9.

5.	INVENTORIES

Inventories consist of the following:


	At September 30		At December 31
	2015		2014
Supplies¹	$	12.0	$	11.3
Concentrate inventory¹		2.2		3.1
Crushed and broken ore stockpiles^1,2		0.6		0.5

Total	$	14.8	$	14.9

¹	This portion of inventories has been pledged as security on the Company’s credit facility. Refer to note 9.

²	Crushed and broken ore stockpiles represent coarse ore that has been extracted from the mine and is available for further processing.

During the nine month period ended September 30, 2015, concentrate inventory was written down in the amount of $0.5 to reflect net realizable value (September 30, 2014 - $nil) and has been recorded as an inventory pricing adjustment.

6.	OTHER ASSETS

Other assets consist of the following:


	At September 30		At December 31
	2015		2014
Prepaids	$	1.9	$	2.0
HST receivable		0.8		0.8
Other		0.1		0.8

	$	2.8	$	3.6

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North American Palladium Ltd.

7.	MINING INTERESTS

Mining interests are comprised of the following:


	Plant and equipment		Underground mine development		Equipment under finance lease		Mining leases and claims, royalty interest, and development		Total
Carrying amounts
As at December 31, 2014	$	64.3	$	358.8	$	18.6	$	11.1	$	452.8

As at September 30, 2015	$	72.4	$	354.7	$	16.8	$	10.6	$	454.5

Depreciation and amortization

As a result of the finalization of the technical report for the LDI mine, which was filed on March 27, 2015 (amended on April 20, 2015), the Company has revised its estimate of in-situ ounces of palladium used as the denominator for depreciation and amortization of certain of its assets under the unit-of-production method. The revised estimate was based on the inclusion of the proven and probable reserves and measured resources expected to be converted to reserves based on prior conversion rates. This change in estimate has been prospectively applied for all depreciation and amortization calculations effective February 1, 2015.

Asset restrictions

The Company’s assets are subject to certain restrictions on title and property, plant and equipment. Substantially all assets are pledged as security for credit agreement arrangements and senior secured lenders. See notes 4, 9, and 11.

8.	ASSET RETIREMENT OBLIGATIONS AND RECLAMATION DEPOSITS

The changes in asset retirement obligations during the nine months ended September 30, 2015 are as follows:


Asset retirement obligations, beginning of period	$	15.8
Change in timing of estimated closure costs		0.5
Accretion expense		0.2

Asset retirement obligations, end of period	$	16.5

Asset retirement obligations comprised the following as at September 30, 2015:


Property	Expected timing of cash flows		Asset retirement obligation		Mine closure plan requirement		Letters of credit outstanding		Undiscounted asset retirement obligation
LDI mine¹		2029	$	16.5	$	14.5	$	14.5	$	20.3

¹	Including a letter of credit for Shebandowan West project, the total letters of credit outstanding are $14.8 for asset retirement obligations. Refer to note 14.

The key assumptions applied for determination of the ARO obligation are as follows as at:


	At September 30 2015			At December 31 2014
Inflation		2.00	%		2.00	%
Market risk		5.00	%		5.00	%
Discount rate		1.44	%		1.67	%

The asset retirement obligation may change materially based on future changes in operations, costs of reclamation and closure activities, and regulatory requirements.

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9.	CREDIT FACILITIES

Bank Facility

The Company has secured a credit facility with a Canadian chartered bank, which was due to mature on July 3, 2015, and was further extended to November 30, 2015. The credit facility is to be used for working capital liquidity and general corporate purposes. The maximum that can be utilized under the facility is the lesser of US$60 and an amount determined by a borrowing base calculation. The credit facility contains certain financial covenants, as defined in the agreement, including senior debt to earnings before interest, taxes, depreciation and amortization ratios, which became effective in the fourth quarter of 2014, and current ratio requirements, minimum tangible net worth requirements and capital expenditure limits which became effective June 7, 2013 which, if not met, result in an event of default. The loan also includes certain other covenants, including material adverse change provisions and cross-default provisions that existed with the senior secured term loan prior to its settlement under the Recapitalization (note 11). Certain events of default result in the credit facility becoming immediately due, while other events of default entitle the lender to demand repayment. At March 31, 2015, the Company received waivers with respect to the current ratio, minimum shareholders’ equity and senior debt to EBITDA ratio covenants, and subsequently received amendments waiving future covenant compliance for the April, May, June and July 2015 compliance tests, subject to certain conditions. On July 15, 2015, the Company made a $11.7 (US$8.7) repayment of the credit facility.

Under the credit facility, as of September 30, 2015, the Company utilized $16.4 (US$12.3) for letters of credit, primarily for reclamation deposits (December 31, 2014 - $15.4 (US$13.3)), and had $27.8 (US$22.5) in borrowings outstanding (December 31, 2014 - $36.8 (US$31.7)). The Company was in compliance with all covenants as at September 30, 2015.

Brookfield Interim Facility

On April 15, 2015, the Company entered into a US$25 interim credit facility (the “Interim Facility”) with Brookfield and utilized the full balance of the available credit. The Interim Facility accumulated interest at 16% per annum and matured on September 15, 2015. All amounts outstanding under the facility were due and payable on that date. A commitment fee of 3% of the Interim Facility amount was capitalized to the principal and interest was accrued at the Interim Facility rate of 16% per annum. The Interim Facility contained a prepayment penalty on the repayment of principal in whole or in part prior to the maturity date. The Interim Facility was accounted for at amortized cost with an effective interest rate of 26.00%.

On August 6, 2015, all amounts owing relating to the Interim Facility were consolidated and settled as part of the amounts owing to Brookfield for the purposes of conversion under the Recapitalization. Refer to note 11.

10.

LEASES

At the respective reporting dates, the Company was party to the following lease arrangements:

FINANCE LEASES (OBLIGATIONS UNDER FINANCE LEASES)

The Company leases production equipment under a number of finance lease agreements. Some leases provide the Company with the option to purchase the equipment at a beneficial price. The leased equipment secures the lease obligations. The net carrying amount of leased equipment at each reporting date is summarized in the mining interests under the category of equipment under finance lease. Refer to note 7.

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North American Palladium Ltd.

The following is a schedule of future minimum lease payments under finance leases together with the present value of the net minimum lease payments at each reporting date:


	At September 30, 2015						At December 31, 2014
	Future minimum lease payments		Interest		Present value of minimum lease payments		Future minimum lease payments		Interest		Present value of minimum lease payments
Less than one year	$	6.1	$	0.8	$	5.3	$	5.5	$	0.9	$	4.6
Between one and five years		11.2		0.6		10.6		15.3		1.1		14.2

	$	17.3	$	1.4	$	15.9	$	20.8	$	2.0	$	18.8
Less current portion						5.3						4.6

					$	10.6					$	14.2

OPERATING LEASES

The Company, from time to time, enters into leasing arrangements for production and other equipment under a number of operating leases. These leases are generally short-term in nature and subject to cancellation clauses. The Company periodically reviews the nature of these leases to identify if there have been any significant changes to the terms and use of the items under operating lease which would require reclassification as a finance lease. Any required reclassification is applied prospectively from the date the revised lease terms become effective.

The following schedule provides the future minimum lease payments under non-cancellable operating leases outstanding at each of the reporting dates:


	At September 30 2015		At December 31 2014
Less than one year	$	1.5	$	1.4
Between one and five years		1.1		1.4

	$	2.6	$	2.8

The total minimum lease payments recognized in expense during each of the stated three and nine month end periods are as follows:


	Three months ended September 30				Nine months ended September 30
	2015		2014		2015		2014
Minimum lease payments expensed	$	0.6	$	0.8	$	2.4	$	2.7

11.

LONG-TERM DEBT

Long-term debt is comprised of the following as at each reporting date:


	At September 30 2015		At December 31 2014
Senior secured term loan	$	—	$	186.4
Bridge loan and other		—		—
Convertible debentures (2012)		—		37.5
Convertible debentures and warrants (2014 – Series 1)		—		0.8
Convertible debentures and warrants (2014 – Series 2)		—		1.4

		—		226.1
Less current portion		—		7.3

	$	—	$	218.8

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North American Palladium Ltd.

Senior secured term loan

On June 7, 2013, the Company closed a US$130 senior secured term loan financing with Brookfield which accumulated interest at 15% per annum and was due June 7, 2017. The Company also exercised an option to defer a commitment fee of US$3.9 for a period of up to two years. The loan was secured by first priority security on the property, plant and equipment and second priority security on accounts receivable and inventory. The Company had the option to accrue interest during the first two years of the loan; in which case, the interest rate on the loan and accrued interest would increase by 4%. The loan was measured at amortized cost.

Amendments to the loan were made on November 29, 2013 and June 30, 2014 which included certain modifications to the loan, including an additional loan of US$15.0, and an amendment fee of US$8.1. As at December 31, 2014, the senior secured term loan was being amortized at an effective interest rate of 18.74%

The loan contained covenants, including senior debt to earnings before interest, taxes, depreciation and amortization ratios, which became effective in the fourth quarter of 2014, and minimum tangible net worth requirements and capital expenditure limits which became effective June 7, 2013 which, if not met, would result in an event of default. The loan also included certain events of default including breaches of the financial covenants, material adverse changes, limits on liens, additional debt, payments and cross-default provisions. Certain events of default result in the loan becoming immediately due, together with the prepayment fee and penalty interest of 5% above the applicable rate while unpaid, and other events of default entitle the lender to demand repayment of the loan together with the prepayment fee and penalty interest.

At March 31, 2015, the Company received waivers with respect to the minimum shareholders’ equity and senior debt to EBITDA ratio covenants, and subsequently received amendments waiving future covenant compliance for the April, May, June and July 2015 compliance tests, subject to certain conditions. During the second quarter of 2015, the Company entered into an agreement to extend the waiver to July 31, 2015, subject to fees in the amount of $3.7 (US$3.0) which were capitalized against the outstanding loan balance.

On June 18, 2015 the Company entered into the Recapitalization with Brookfield aimed at significantly reducing the Company’s debt and enhancing the Company’s liquidity. In applying the effective interest method in the three months ended June 30, 2015, the Company reassessed its estimated cash flows under the senior secured term loan and recorded an adjustment to the carrying value of the debt of $66.8 to reflect the present value of accelerated interest expense, primarily related to the expected settlement of the prepayment fee.

On July 30, 2015, the Recapitalization received shareholder approval and was completed on August 6, 2015, resulting in the conversion of the outstanding balance of the senior secured term loan into common shares of the Company.

At the time of the Recapitalization, the Company issued 18,214,401,868 common shares with a fair value of $364.3 to settle debt amounts owing to Brookfield relating to the senior secured term loan, interim credit facility, waiver fees, and related make-whole and commitment fees with an aggregate carrying value of $321.1, resulting in a loss on recapitalization of $43.2 being recorded in the Condensed Interim Consolidated Statements of Operations and Comprehensive Loss. Refer to notes 1 and 12(b).

Bridge Loan

On June 18, 2015, the Company entered into a US$25 bridge loan facility providing temporary working capital support (“Bridge Loan”) with Brookfield. The Bridge Loan accumulated interest at 16% per annum and matured on September 15, 2015. A commitment fee of 3% of the Bridge Loan in the amount of $0.9 (US$0.8) was settled in cash at the inception of the loan. The Bridge Loan contained a prepayment penalty on the repayment of principal in whole or in part prior to the maturity date. On June 19, 2015, the Company received an initial advance in the amount of US$15.0. The final advance in the amount of US$10.0 was received on July 14, 2015. The loan was carried at amortized cost at an effective interest rate of 28.56%.

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On September 18, 2015, the US$25.0 outstanding balance of the Bridge Loan, including accrued interest, was settled in cash, with the exception of a nominal balance for settlement at a later date.

Waiver Fees

As a result of the covenant violations which occurred in March 2015, the Company also incurred waiver fees in the amount of US$3.0 which had been included in the outstanding loan balances and are recognized as financing costs in the condensed interim consolidated statements of operations and comprehensive loss. These waiver fees were consolidated and settled in full as part of the amounts owing to Brookfield for the purposes of conversion under the Recapitalization.

Convertible Debentures (2012)

On July 31, 2012, the Company completed an offering of 43,000 convertible unsecured subordinated debentures of the Company at a price of $1,000 per debenture, for total gross proceeds of $43.0 ($40.8 net proceeds). The debentures were to mature on September 30, 2017 and bore interest at a rate of 6.15% per year, payable semi-annually. At the option of the holder, the debentures could be converted into common shares of the Company at any time prior to maturity at a conversion price of $2.90 per common share.

The convertible debentures were compound financial instruments, consisting of the debt instrument and the equity conversion feature. Transaction costs were netted against the debt instrument and equity component based on the pro-rata allocation of the fair value of each instrument at initial recognition. The debt instrument was valued at amortized cost using the effective interest rate method at a discount rate of 10.5%. Of the net proceeds of $40.8, $33.9 had been allocated to long-term debt, and the remaining portion of $6.9 had been allocated to the equity component of the convertible debentures at the time of issuance.

At the time of the Recapitalization, the Company issued 1,181,002,018 common shares with a fair value of $23.6 to settle the debt amount with a carrying value of $38.5, resulting in a gain on recapitalization of $14.9 being recorded in the Condensed Interim Consolidated Statements of Operations and Comprehensive Loss. Refer to notes 1 and 12(b).

In conjunction with the conversion of the debt, the $6.9 relating to the equity component of the convertible debentures was reclassified within equity to capital stock.

Convertible Debentures (2014 – Series 1)

On January 31, 2014 and February 10, 2014, the Company closed a public offering with the aggregate sale of $32.0 gross principal amount of convertible unsecured subordinated debentures (the “2014 Series 1 Debentures”) of the Company at a price of $1,000 per Debenture, including approximately 16.8 million common share purchase warrants (the “2014 Series 1 Warrants”). The 2014 Series 1 Debentures were to mature on January 31, 2019, unless redeemed or converted earlier, or unless extended, and accumulated interest at an annual rate of 7.5% payable semi-annually in arrears on January 31 and July 31 of each year. Each 2014 Series 1 Warrant entitled the holder thereof to purchase one common share of the Company at any time before March 28, 2017.

This offering represented the first tranche of the offering. Net proceeds received were $28.5. The conversion price of the 2014 Series 1 Debentures was $0.635 per common share, and the original exercise price of the 2014 Series 1 Warrants was $0.762 per common share. As a result of the completion of the second tranche offering, the anti-dilution clause within the 2014 Series 1 Debentures agreements resulted in an adjustment of the original exercise price for the 2014 Series 1 Warrants to $0.5786 per common share.

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North American Palladium Ltd.

Due to the existence of multiple derivatives embedded within the contract, the Company elected to account for the 2014 Series 1 Debentures, the 2014 Series 1 Warrants, and all related derivatives as one instrument at fair value through profit or loss, with changes in fair value being recognized as derivative gains or losses through profit or loss. As a result of this election, transaction costs of $3.5 were expensed as financing costs for the year ended December 31, 2014.

At December 31, 2014, 2014 Series 1 Debentures with an initial face value of $31.7, including accrued interest and make-whole provisions, had been converted into 76,407,816 common shares of NAP.

In the first quarter of 2015, 2014 Series 1 Debentures with an initial face value of $0.3, including accrued interest and make-whole provisions, had been converted into 760,312 common shares of NAP.

On June 18, 2015, the Company entered into the Recapitalization with Brookfield. On July 30, 2015, the Recapitalization received shareholder approval and was completed on August 6, 2015, resulting in the conversion of the outstanding balance of the 2014 Series 1 Debentures into common shares of the Company and cancellation of the outstanding 2014 Series 1 Warrants.

Convertible Debentures (2014 – Series 2)

On April 11, 2014 and April 17, 2014, the Company closed a public offering with the aggregate sale of $35.0 gross principal amount of convertible unsecured subordinated debentures (the “2014 Series 2 Debentures”) of the Company at a price of $1,000 per Debenture, including approximately 18.9 million common share purchase warrants (the “2014 Series 2 Warrants”). The 2014 Series 2 Debentures were to mature on April 11, 2019, unless redeemed or converted earlier, or unless extended, and accumulated interest at an annual rate of 7.5% payable semi-annually in arrears on March 31 and September 30 of each year. Each 2014 Series 2 Warrant entitled the holders thereof to purchase one common share of the Company at any time before the second anniversary of the date of issue.

This offering represented the second tranche of the offering. Net proceeds received were $32.7. The conversion price of the 2014 Series 2 Debentures was $0.4629 per common share, and the exercise price of the 2014 Series 2 Warrants was $0.5786 per common share.

Due to the existence of multiple derivatives embedded within the contract, the Company elected to account for the 2014 Series 2 Debentures, the 2014 Series 2 Warrants, and all related derivatives as one instrument at fair value through profit or loss, with changes in fair value being recognized as derivative gains or losses through profit or loss. As a result of this election, transaction costs of $2.3 were expensed in the period as financing costs for the year ended December 31, 2014.

At December 31, 2014, 2014 Series 2 Debentures with an initial face value of $33.5, including accrued interest and make-whole provisions, had been converted into 108,972,404 common shares of NAP.

In the first quarter of 2015, 2014 Series 2 Debentures with an initial face value of $0.9, including accrued interest and make-whole provisions, had been converted into 4,497,858 common shares of NAP.

On June 18, 2015, the Company entered into the Recapitalization with Brookfield. On July 30, 2015, the Recapitalization received shareholder approval and was completed on August 6, 2015, resulting in the conversion of the outstanding balance of the 2014 Series 2 Debentures into common shares of the Company and cancellation of the outstanding 2014 Series 2 Warrants.

At the time of the Recapitalization, the Company issued 6,893,756 common shares with a fair value of $0.1 to settle the 2014 Series 1 Debentures and 2014 Series 2 Debentures with an aggregate carrying value of $0.1, resulting in no gain or loss on recapitalization being recorded in the Condensed Interim Consolidated Statements of Operations and Comprehensive Loss. Refer to notes 1 and 12(b).

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12.

SHAREHOLDERS’ EQUITY

(a)

Authorized and Issued Capital Stock

The authorized capital stock of the Company consists of an unlimited number of common shares.

(b)

Recapitalization

On June 18, 2015, the Company entered into the Recapitalization with Brookfield. On July 30, 2015, the Recapitalization received shareholder approval and was completed on August 6, 2015, resulting in the cancellation of all outstanding options and warrants and the conversion of all amounts owing to Brookfield, other than the Bridge Loan; the 2012 and 2014 convertible debentures; and outstanding restricted share units into equity. Refer to note 11. A fair value of $0.02 per share was assigned for accounting purposes based on the closing price for the Company’s common shares in the market for the days immediately preceding and up to the closing date of the Recapitalization. Consideration was also given to analyses prepared previously in conjunction with the Company’s strategic review process which had been performed to solicit interest and obtain a superior proposal prior to the closing of the Recapitalization. At the time of the Recapitalization, the Company issued 19,404,572,359 common shares with a fair value of $388.1 to settle debt amounts with an aggregate carrying value of $359.8, resulting in a loss on recapitalization of $28.3 being recorded in the Condensed Interim Consolidated Statements of Operations and Comprehensive Loss. A total of 19,798,262,900 common shares were outstanding after the Recapitalization on August 6, 2015.

Immediately subsequent to issuance of shares under the Recapitalization, all of the common shares issued and outstanding were consolidated on the basis of one common share in the capital of the Company for every 400 existing common shares. On August 6, 2015, subsequent to the share consolidation, the Company had 49,495,656 common shares outstanding, before inclusion of shares issued in relation to the Rights Offering.

As a result of the Recapitalization, Brookfield acquired 92% of the issued and outstanding common shares of the Company on August 6, 2015.

(c)

Rights Offering and Backstop Agreement

On September 15, 2015, the Company completed a Rights Offering. Pursuant to the Rights Offering, each shareholder of record of NAP common shares at the close of business on August 20, 2015 received one right for each common share then held. An aggregate of 49,495,656 Rights were distributed to shareholders pursuant to the rights offering. Every 5.91 rights entitled the holder thereof to purchase one common share at an exercise price of $5.97 per common share thereof to acquire up to 8,379,613 common shares for gross proceeds of $50.0.

The Company also entered into a backstop agreement with Brookfield pursuant to which Brookfield and Polar had, subject to certain terms and conditions, agreed to purchase, in aggregate, all of the common shares which remained unsubscribed for by the holders of the rights at the expiry of the rights offering. The Company incurred fees relating to the backstop (“Backstop Fees”) in the amount of $1.5 that have been recognized as transactions costs which have been netted against common share capital and purchase warrants on the condensed interim consolidated balance sheets. On closing of the Rights Offering, the Company settled the liability relating to the Backstop Fees with the issuance of 226,131 common shares to Brookfield and 25,126 common shares to Polar, representing a conversion price of $5.97 per common share.

On September 15, 2015, the Company issued 8,630,870 common shares pursuant to the exercise of the rights for cash proceeds of $49.6, net of transaction costs.

Upon completion of the Rights Offering, a total of 58,126,526 common shares are issued and outstanding. Brookfield holds approximately 53.5 million common shares, representing approximately 92% of the issued and outstanding common shares or substantially the same ownership percentage as prior to the Rights Offering.

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(d)

Group Registered Retirement Savings Plan

The Company has a group registered retirement savings plan, in which eligible employees can participate in at their option. Union employees are entitled to an employer contribution of either: (a) $1.00 for each $1.00 contribution up to a maximum of 5% of base salary for employees who have been employed for 6-18 months (maximum $2,500 per year); or (b) $2.00 for each $1.00 contribution up to a maximum of 10% of base salary for employees who have been employed for greater than 18 months (maximum $5,000 per year). Non-union employees are entitled to an employer contribution equal to 3% of base salary plus an employer matching contribution of up to a maximum of 2% of base salary for employees who have been employed for greater than 90 days. The Company contributions are made either in cash or treasury shares of the Company on a quarterly basis. If the matching contribution is made in treasury shares, the price per share issued is the 5-day volume weighted average trading price of the common shares on the Toronto Stock Exchange (“TSX”) preceding the end of the quarter. During the three month period ended September 30, 2015, the Company did not make any share contributions to the plan (2014 – 753,799 shares with a fair value of $0.4), and for the nine months ended September 30, 2015, 1,917,594 shares with a fair value of $0.3 (2014 – 1,228,208 shares with a fair value of $0.7), which was equal to the market value of the shares on the contribution date.

(e)

Corporate Stock Option Plan

The Company had a Corporate Stock Option Plan (the “Plan”), under which eligible directors, officers, employees and consultants of the Company may receive options to acquire common shares. The Plan was administered by the Board of Directors, which determined, after considering recommendations made by the Compensation Committee, the number of options to be issued, the exercise price (which is the 5-day volume weighted average trading price of the common shares on the TSX on the trading day prior to the grant date), expiration dates of each option, the extent to which each option is exercisable (provided that the term of an option shall not exceed 10 years from the date of grant), as well as establishing the time period should the optionee cease to be an “Eligible Person” as set forth in the conditions of the Plan. One third of options granted vest on each of the first three anniversary dates of the date of grant.

The maximum number of common shares issuable under the Plan, and all other share-based compensation arrangements of the Company, shall not exceed 3.49% of the issued and outstanding shares of the Company (“the cap”). As at December 31, 2014, 1,228,858 options were available to be granted under the Plan.

The completion of the Recapitalization on August 6, 2015 resulted in the cancellation of all outstanding options and termination of the existing corporate stock option plan. Refer to notes 1 and 12(b).

The following summary sets out the activity in outstanding common share purchase options:


	At September 30, 2015					At December 31, 2014
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding, beginning of period		5,371,142		$	0.99		3,359,221		$	1.91
Granted		100,000		$	0.16		2,596,700		$	0.18
Cancelled/forfeited		(5,463,642	)	$	0.96		(549,779	)	$	2.29
Expired		(7,500	)	$	8.87		(35,000	)	$	8.40

Outstanding, end of period		—		$	—		5,371,142		$	0.99

Options exercisable at end of period		—		$	—		1,341,752		$	2.35

No options were exercised during the nine month period ended September 30, 2015 or the year ended December 31, 2014.

The fair value of options granted during the nine months ended September 30, 2015 and the year ended December 31, 2014 have been estimated at the date of grant using the Black Scholes option pricing model with the following weighted average assumptions:

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North American Palladium Ltd.


	September 30 2015			December 31 2014
Awards granted		100,000			2,596,700
Weighted average fair value of awards	$	0.10		$	0.09
Pre-vest forfeiture rate		27	%		27	%
Grant price	$	0.16		$	0.18
Market price	$	0.17		$	0.17
Volatility¹		78	%		76	%
Risk free rate		1.08	%		1.37	%
Dividend yield		0	%		0	%
Expected life (in years)		3.52			4.2

¹	Expected volatility is estimated by considering historic average share price volatility based on the average expected life of the options.

(f)

Reconciliation of the diluted number of shares outstanding:


	Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014
Net loss available to common shareholders	$	(68.5	)	$	(18.8	)	$	(202.6	)	$	(55.4	)
Effect of dilutive securities		—			—			—			—

Adjusted net loss available to common shareholders	$	(68.5	)	$	(18.8	)	$	(202.6	)	$	(55.4	)

Weighted average number of shares outstanding		31,392,831			961,081			11,229,418			807,106
Effect of dilutive securities		—			—			—			—

Weighted average diluted number of shares outstanding		31,392,831			961,081			11,229,418			807,106

Diluted net loss per share	$	(2.18	)	$	(19.56	)	$	(18.04	)	$	(68.64	)

The Recapitalization included a share consolidation which occurred without a corresponding change in the Company’s financial resources. Refer to note 12(b). Therefore, for the purpose of presenting the basic and diluted loss per share for the current and comparative periods, the weighted average number of shares outstanding have been adjusted retrospectively as if the share consolidation had been applied to all of the shares issued and outstanding during the three and nine months ended September 30, 2015 and 2014.

For the three and nine month periods ended September 30, 2014, the dilutive effects of the convertible debentures, warrants, restricted share units and stock options have not been included in the determination of diluted loss per share because to do so would be anti-dilutive. As a result of the Recapitalization completed on August 6, 2015, no convertible debentures, warrants, restricted share units or stock options existed at September 30, 2015. Therefore, no dilutive effects remain relating to these instruments.

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(g)

Other Stock-Based Compensation – Restricted Share Unit Plan

The Company had a Restricted Share Unit Plan (“RSU”) under which eligible directors, officers and key employees of the Company were entitled to receive awards of RSUs. Each RSU was equivalent in value to the fair market value of a common share of the Company on the date of the award and a corresponding liability is established on the balance sheet. The RSU plan was administered by the Board of Directors, which would determine, after considering recommendations made by the Compensation Committee, the number and timing of RSUs to be awarded and their vesting periods, not to exceed three years. The value of each award was charged to compensation expense over the period of vesting. At each reporting date, the compensation expense and liability were adjusted to reflect the changes in market value of the liability based on the fair values of RSU’s for each vesting period determined using the Black-Scholes model.

The Recapitalization was completed on August 6, 2015, resulting in the conversion of all outstanding RSUs into an equivalent number of common shares. At the time of the Recapitalization, the Company issued 2,274,717 common shares with a fair value of $0.1 to settle the outstanding RSUs with an aggregate carrying value of $0.1, resulting in no gain or loss on recapitalization being recorded in the Condensed Interim Consolidated Statements of Operations and Comprehensive Loss. Refer to notes 1 and 12(b).

(h)

Summary of Share-based compensation and employee benefits

The following table details the components of share-based compensation expense (income):


	Three months ended September 30				Nine months ended September 30
	2015		2014		2015		2014
Registered retirement savings plan	$	—	$	0.4	$	0.3	$	1.1
Common share stock options		0.4		0.1		0.6		0.5
Restricted share units		—		—		—		(0.2	)

	$	0.4	$	0.5	$	0.9	$	1.4

13.

FINANCIAL INSTRUMENTS

Fair Values

At September 30, 2015, the Company’s financial assets and liabilities consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, credit facility, and obligations under finance leases.

Cash and cash equivalents, accounts receivable, and current derivative liabilities are stated at fair value. The carrying value of other assets and trade accounts payable and accrued liabilities and the amount outstanding under the credit facility approximate their fair values due to the immediate or short-term maturity of these financial instruments.

Derivatives

The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.

Fair values reflect the credit risk of the instrument and include adjustments to take into account the credit risk of the Company entity and counterparty when appropriate.

The Company periodically enters into financial contracts to mitigate the smelter agreements’ provisional pricing exposure to rising or declining palladium prices and an appreciating Canadian dollar for past production already sold. For substantially all of the palladium delivered to customers under smelter agreements, the quantities and timing of settlement specified in the financial contracts matches final pricing settlement periods. The palladium financial contracts are being recognized on a mark-to-market basis as an adjustment to revenue.

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Other non-derivative financial liabilities

The fair values of the senior secured term loan, 2012 convertible debentures and finance leases, which are determined for disclosure purposes, are calculated based on the present value of future principal and interest cash flows, discounted at the estimated market rate of interest at the reporting date. For finance leases the estimated market rate of interest is determined by reference to similar lease agreements.

The fair values of the non-derivative financial liabilities are comprised of the following as at each reporting date:


	At September 30 2015		At December 31 2014
Senior secured term loan	$	—	$	201.0
Convertible debentures (2012)		—		45.2
Finance leases		15.9		18.8

Fair Value Hierarchy

The table below details the fair values of the assets and liabilities at September 30, 2015:


	Notes		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Aggregate Fair Value
Financial assets
Cash and cash equivalents			$	16.1	$	—		$	—	$	16.1
Accounts receivable		4		—		61.1			—		61.1
Financial liabilities
Finance leases				—		(15.9	)		—		(15.9	)

Net carrying value			$	16.1	$	45.2		$	—	$	61.3

14.

COMMITMENTS

(a)

PGM Royalties Ltd. (“PGMR”) Commitment

The Company is required to pay a 5% net smelter royalty to PGMR from mining operations at the Lac des Iles mine. The royalty had been previously payable to Sheridan Platinum Group of Companies (“SPG”). This obligation is recorded as royalty expense.

(b)

Operating Leases and Other Purchase Obligations

As at September 30, 2015, the Company had outstanding operating lease commitments and other purchase obligations of $2.6 and $8.8 respectively (December 31, 2014 – $2.8 and $5.1 respectively) the majority of which had maturities of less than five years (see also note 10).

(c)

Letters of Credit

As at September 30, 2015, the Company had outstanding letters of credit of $16.4, consisting of $14.5 for various mine closure deposits and $1.9 for a regulated energy supplier (December 31, 2014 - $15.4 outstanding letters of credit, consisting of $14.4 for various mine closure deposits and $1.0 for a regulated energy supplier).

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15.

REVENUE FROM METAL SALES


	Total			Palladium			Platinum			Gold			Nickel			Copper			Other Metals
2015
Three months ended September 30
Revenue – before pricing adjustments	$	62.1		$	47.1		$	5.3		$	5.2		$	2.1		$	2.4		$	—
Pricing adjustments:
Commodities		—			0.8			(0.7	)		—			(0.1	)		—			—
Foreign exchange		2.6			1.9			0.4			0.2			0.1			—			—

Revenue – after pricing adjustments	$	64.7		$	49.8		$	5.0		$	5.4		$	2.1		$	2.4		$	—

2014
Three months ended September 30
Revenue – before pricing adjustments	$	47.2		$	34.1		$	4.3		$	3.5		$	3.2		$	2.1		$	—
Pricing adjustments:
Commodities		(3.3	)		(2.1	)		(0.7	)		(0.1	)		(0.3	)		(0.1	)		—
Foreign exchange		2.5			1.9			0.3			0.1			0.1			0.1			—

Revenue – after pricing adjustments	$	46.4		$	33.9		$	3.9		$	3.5		$	3.0		$	2.1		$	—


	Total			Palladium			Platinum			Gold			Nickel			Copper			Other Metals
2015
Nine months ended September 30
Revenue – before pricing adjustments	$	154.2		$	114.6		$	13.8		$	11.6		$	7.5		$	6.6		$	0.1
Pricing adjustments:
Commodities		(6.0	)		(4.2	)		(1.5	)		0.1			(0.3	)		(0.1	)		—
Foreign exchange		7.8			5.7			0.9			0.6			0.4			0.2			—

Revenue – after pricing adjustments	$	156.0		$	116.1		$	13.2		$	12.3		$	7.6		$	6.7		$	0.1

2014
Nine months ended September 30
Revenue – before pricing adjustments	$	143.8		$	103.1		$	13.1		$	11.1		$	9.4		$	7.0		$	0.1
Pricing adjustments:
Commodities		0.6			0.6			(0.2	)		0.2			0.2			(0.2	)		—
Foreign exchange		1.3			0.7			0.3			0.1			0.1			0.1			—

Revenue – after pricing adjustments	$	145.7		$	104.4		$	13.2		$	11.4		$	9.7		$	6.9		$	0.1

During the three and nine month periods ending September 30, 2015, the Company delivered all of its concentrate to four customers under the terms of the respective agreements (2014 – two customers).

Although the Company sells its bulk concentrate to a limited number of customers, it is not economically dependent upon any one customer as there are other markets throughout the world for the Company’s concentrate.

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16.

INTEREST EXPENSE AND OTHER COSTS (INCOME)


			Three months ended September 30						Nine months ended September 30
	Note		2015			2014			2015			2014
Interest costs, prepayment fee and other
Interest on finance leases			$	0.2		$	0.1		$	0.7		$	0.4
Asset retirement obligation accretion		8		0.1			0.1			0.2			0.3
Accretion expense on long-term debt				4.1			1.6			10.3			1.0
Loss on investments				—			0.3			—			0.7
Interest expense				5.6			8.2			25.3			28.8
Change in fair value of palladium warrants				—			0.1			—			0.6
Change in fair value of convertible debentures				—			(0.2	)		0.2			6.4
Change in carrying value of senior secured term loan		11		—			—			66.8			—
Legal settlements				—			—			—			1.0

			$	10.0		$	10.2		$	103.5		$	39.2

Interest and other income
Decrease in fair value of 2014 Tranche 1 and 2 warrants, net			$	(0.1	)	$	(1.5	)	$	(0.7	)	$	(3.8	)
Interest income				—			—			(0.4	)		(0.1	)

			$	(0.1	)	$	(1.5	)	$	(1.1	)	$	(3.9	)

			$	9.9		$	8.7		$	102.4		$	35.3

17.

OTHER DISCLOSURES

Statement of Cash flows

The net changes in non-cash working capital balances related to operations are as follows:


	Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014
Cash provided by (used in):
Accounts receivable	$	(20.6	)	$	2.9		$	14.4		$	(14.0	)
Inventories		9.1			1.0			(0.1	)		0.1
Other assets		1.9			0.3			0.8			5.2
Accounts payable and accrued liabilities		(2.4	)		(0.7	)		(2.0	)		(25.8	)
Taxes payable		—			—			—			(1.2	)

	$	12.0		$	3.5		$	13.1		$	(35.7	)

18.

RELATED PARTY

Brookfield Asset Management Inc. (“BAM”) is a global alternative asset management company. The company owns and operates assets with a focus on property, renewable energy, infrastructure and private equity. The company is listed on the New York, Toronto and Euronext stock exchanges under the symbols BAM, BAM.A and BAMA, respectively. The company was formed by articles of amalgamation under the Business Corporations Act (Ontario) and is registered in Ontario, Canada. The registered office of the company is Brookfield Place, 181 Bay Street, Suite 300, Toronto, Ontario, M5J 2T3.

On June 18, 2015 the Company entered into the Recapitalization with Brookfield Capital Partners Ltd. (“Brookfield”), a 100% owned subsidiary of BAM, aimed at significantly reducing the Company’s debt and enhancing the Company’s liquidity.

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On July 30, 2015, the Recapitalization received shareholder approval and was completed on August 6, 2015, resulting in conversion of all the outstanding principal amounts owing to Brookfield into equity, other than the Bridge Loan. After giving effect to the Recapitalization, Brookfield held a controlling interest in the Company with a 92% ownership of the common shares outstanding on a fully-diluted basis. The Company’s financial results are consolidated and reported as part of the Brookfield Private Equity Funds at September 30, 2015.

On September 15, 2015, the Company undertook a $50 rights offering to raise equity, pursuant to which all shareholders at that time will be able to participate. The rights offering was backstopped by Brookfield. A total of 8,379,613 common shares were purchased under the Rights Offering. Pursuant to the basic subscription privilege, approximately 8.0 million common shares were subscribed for by rightholders, including approximately 7.7 million common shares by Brookfield.

Pursuant to the terms of the backstop agreement dated June 18, 2015, Brookfield and Polar purchased an aggregate of approximately 0.4 million common shares not otherwise purchased by rightholders under the basic subscription privilege and additional subscription privilege (the Backstop Commitment”). In consideration for the Backstop Commitment, the Company issued 226,131 common shares to Brookfield and 25,126 common shares to Polar.

Upon completion of the Rights Offering, a total of 58,126,526 common shares are issued and outstanding. Upon completion of the Rights Offering, Brookfield held approximately 53.5 million common shares, representing approximately 92% of the issued and outstanding common shares or substantially the same ownership percentage as prior to the Rights Offering.

On September 18, 2015, the US$25.0 outstanding balance of the Bridge Loan, including accrued interest, was settled in cash, with the exception of a nominal balance for settlement at a later date.

Refer to notes 1, 9, 11, 12(b) and 12(c) for additional disclosures relating to the above transactions.

Third Quarter Report 2015

Exhibit 3

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North American Palladium Ltd.

TABLE OF CONTENTS


	Page

Management’s Discussion and Analysis

INTRODUCTION		1

FORWARD-LOOKING INFORMATION		1

CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING MINERAL RESERVES AND RESOURCES		2

OUR BUSINESS		2

RECAPITALIZATION TRANSACTION		3

WORKFORCE REDUCTION		3

WATER BALANCE UPDATE		4

HIGHLIGHTS		4

LDI OPERATING & FINANCIAL RESULTS		5

OTHER EXPENSES		10

SUMMARY OF QUARTERLY RESULTS		11

FINANCIAL CONDITION, CASH FLOWS, LIQUIDITY AND CAPITAL RESOURCES		12

OUTSTANDING SHARE DATA		14

CRITICAL ACCOUNTING POLICIES AND ESTIMATES		15

OTHER INFORMATION		18

RISKS AND UNCERTAINTIES		19

INTERNAL CONTROLS		19

NON-IFRS MEASURES		20

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North American Palladium Ltd.

Management’s Discussion and Analysis

INTRODUCTION

Unless the context suggests otherwise, references to “NAP” or the “Company” or similar terms refer to North American Palladium Ltd. and its subsidiaries. “LDI” refers to Lac des Iles Mines Ltd.

The following is management’s discussion and analysis of the financial condition and results of operations (“MD&A”) to enable readers of the Company’s condensed interim consolidated financial statements and related notes to assess material changes in financial condition and results of operations for the three and nine months ended September 30, 2015, compared to those of the respective periods in the prior year. This MD&A has been prepared as of November 5, 2015 and is intended to supplement and complement the condensed interim consolidated financial statements and notes thereto for the three and nine months ended September 30, 2015 (collectively, the “Financial Statements”), which have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as issued by the IASB. Readers are encouraged to review the Financial Statements in conjunction with their review of this MD&A and the most recent Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission (“SEC”) and Canadian provincial securities regulatory authorities, available at www.sec.gov and www.sedar.com, respectively.

Dr. David Peck, the Company’s Vice President, Exploration and a Qualified Person under National Instrument 43-101, has reviewed and approved all technical items disclosed in this MD&A.

All dollar amounts are in millions of Canadian dollars unless otherwise noted and all references to production ounces refer to payable production.

FORWARD-LOOKING INFORMATION

Certain information contained in this MD&A constitutes ‘forward-looking statements’ within the meaning of the ‘safe harbor’ provisions of the Canadian securities laws and the United States Private Securities Litigation Reform Act of 1995 . All statements other than statements of historical fact are forward-looking statements. The words ‘planned’, ‘preliminary’, ‘expect’, ‘potential’, ‘believe’, ‘anticipate’, ‘contemplate’, ‘target’, ‘may’, ‘will’, ‘could’, ‘would’, ‘intend’, ‘estimate’ and similar expressions identify forward-looking statements. Forward-looking statements included in this MD&A include, without limitation: information as to our strategy, plans or future financial or operating performance such as statements with respect to project timelines, production plans, projected cash flows or expenditures, operating cost estimates, mining methods, expected mining and milling rates, metal price and foreign exchange rates and other statements that express management’s expectations or estimates of future performance. The Company cautions the reader that such forward-looking statements involve known and unknown risk factors that may cause the actual results to be materially different from those expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to: the risk that the LDI mine may not perform as planned, the possibility that commodity prices and foreign exchange rates may fluctuate, the possibility that the Company may not be able to generate sufficient cash to service its indebtedness and may be forced to take other actions, the risk the Company may not be able to continue as a going concern, the possibility the Company will require substantial additional financing, events of default on its indebtedness, hedging could expose it to losses, competition, the possibility title to its mineral properties will be challenged, dependency on third parties for smelting and refining, inherent risks associated with development, exploration, mining and processing including risks related to tailings capacity and ground conditions, the risks associated with obtaining necessary licenses and permits, environmental hazards, uncertainty of mineral reserves and resources, changes in legislation, regulations or political and economic developments in Canada and abroad, employment disruptions including in connection with collective agreements between the Company and unions and litigation. For more details on these and other risk factors see the Company’s most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities. Forward-looking statements are necessarily based

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upon a number of factors and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions contained in this MD&A, which may prove to be incorrect, include, but are not limited to: that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business, that metal prices and exchange rates between the Canadian and United States dollar will be consistent with the Company’s expectations, that there will be no material delays affecting operations or the timing of ongoing projects, that prices for key mining and construction supplies, including labour costs, will remain consistent with the Company’s expectations, and that the Company’s current estimates of mineral reserves and resources are accurate. The forward-looking statements are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise, except as expressly required by law. Readers are cautioned not to put undue reliance on these forward-looking statements.

CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING MINERAL RESERVES AND RESOURCES

Mineral reserve and mineral resource information contained herein has been calculated in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects, as required by Canadian provincial securities regulatory authorities. Canadian standards differ significantly from the requirements of the SEC, and mineral reserve and mineral resource information contained herein is not comparable to similar information disclosed in accordance with the requirements of the SEC. While the terms “measured”, “indicated” and “inferred” mineral resources are required pursuant to National Instrument 43-101, the SEC does not recognize such terms. U.S. investors should understand that “inferred” mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. In addition, U.S. investors are cautioned not to assume that any part or all of NAP’s mineral resources constitute or will be converted into reserves. For a more detailed description of the key assumptions, parameters and methods used in calculating NAP’s mineral reserves and mineral resources, see NAP’s most recent Annual Information Form/Form 40-F on file with Canadian provincial securities regulatory authorities and the SEC.

OUR BUSINESS

NAP is an established precious metals producer that has been operating its LDI mine located in Ontario, Canada since 1993. LDI is one of only two primary producers of palladium in the world, offering investors exposure to the price of palladium.

The Company recently expanded the underground LDI mine and has transitioned from ramp access to shaft access while utilizing long hole open stope mining. In the second quarter of 2015, the Company entered into a new three year collective agreement with its hourly employees that runs from June 1, 2015 to May 31, 2018.

The Company has significant exploration potential near the LDI mine, where a number of growth targets have been identified, and is engaged in an exploration program aimed at increasing its palladium reserves and resources. As an established platinum group metal (“PGM”) producer on a permitted property, NAP has the potential to convert exploration success into production and cash flow on an accelerated timeline.

NAP trades on the TSX under the symbol PDL and on the OTC Market under the symbol PALDF.

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North American Palladium Ltd.

RECAPITALIZATION TRANSACTION

On June 18, 2015 the Company entered into an agreement with Brookfield Capital Partners Ltd. (“Brookfield”), its senior secured term loan lender, aimed at significantly reducing the Company’s debt and enhancing the Company’s liquidity (the “Recapitalization arrangement”). Brookfield is a 100% owned subsidiary of Brookfield Asset Management Inc. (“BAM”).

On July 30, 2015, the Recapitalization arrangement received shareholder approval and was completed on August 6, 2015, resulting in the following: (i) cash settlement of all accrued interest owing to debtors at August 6, 2015 regarding the debt balances noted below immediately prior to conversion of the principal balances under the Recapitalization; (ii) conversion of all the outstanding principal amounts owing to Brookfield into equity, other than the bridge loan facility (“Bridge Loan”), resulting in Brookfield owning common shares representing 92% of the common shares outstanding on a fully diluted basis after giving effect to the Recapitalization arrangement, but prior to the rights offering; (iii) conversion of the outstanding principal relating to the 2012 and 2014 convertible debentures into equity, resulting in holders of convertible debentures owning common shares representing in aggregate 6% of the common shares outstanding on a fully diluted basis after giving effect to the Recapitalization arrangement, but prior to the rights offering described below; (iv) existing holders of common shares own 2% of the post-Recapitalization common shares outstanding on a fully diluted basis after giving effect to the Recapitalization arrangement, but prior to the rights offering; (v) the Company’s outstanding restricted share units were converted into common shares; (vi) the Company’s outstanding warrants and options were terminated; (vii) the common shares issued and outstanding were consolidated on the basis of one common share in the capital of the Company for every 400 existing common shares.

After completion of the Recapitalization, the Company undertook a $50 rights offering to raise equity, pursuant to which all shareholders at that time were able to participate. The rights offering was backstopped by Brookfield and Polar Securities Inc. These funds were used to repay the bridge loan with Brookfield, except for a nominal amount, which was repaid on September 18, 2015, and to fund ongoing operations.

WORKFORCE REDUCTION

On September 30, 2015, in response to weak metal prices the Company reduced its workforce and stopped blending low grade surface stockpiled ore with the higher grade underground ore and returned to a 14 day on, 14 day off operating schedule for the mill. Due to the reduction in low grade material being processed and the impact of the temporary mill shut down earlier this year as a result of water balance issues the Company has revised its 2015 guidance to 160,000 to 170,000 ounces of palladium down from the previously announced 185,000 to 205,000 ounces.

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WATER BALANCE UPDATE

Milling operations at the Lac des Iles site were shut down from May 11 to June 26, 2015 due to a buildup of excess water behind the Company’s tailings management facility. This required a controlled discharge of reclaim water to the environment with oversight from the Ontario Ministry of the Environment and Climate Change (“MOECC”). Ongoing monitoring indicates that the water quality in the downstream water bodies has returned to background levels that existed before the discharge occurred and no detrimental effects to the natural environment have been noted. The Company has implemented an enhanced monitoring and remediation plan in consultation with First Nations groups and the MOECC to identify and mitigate any potential longer term impacts. Orders issued at the time of the discharge by the MOECC have all been complied with and have subsequently been rescinded.

HIGHLIGHTS


	Three months ended September 30						Nine months ended September 30
OPERATIONAL HIGHLIGHTS	2015			2014			2015			2014
Mining
Tonnes ore mined		443,312			575,664			1,854,705			1,612,748
Palladium grade (g/t)		3.5			2.6			3.0			2.9
Milling
Tonnes ore milled		659,817			566,494			1,747,379			1,604,483
Palladium head grade (g/t)		3.6			2.4			3.0			2.9
Palladium recovery (%)		83.4			80.7			82.9			83.1
Palladium production – payable oz		57,914			32,560			126,444			114,423
Palladium sales – payable oz		57,490			36,430			126,593			116,631
Realized palladium price per ounce (US$)	$	667		$	860		$	746		$	806
Cash cost per ounce palladium sold (US$) ¹	$	522		$	589		$	590		$	527

FINANCIAL HIGHLIGHTS	Three months ended September 30						Nine months ended September 30
($millions except per share amounts)	2015			2014			2015			2014
Revenue	$	64.7		$	46.4		$	156.0		$	145.7
Production costs including mine restoration and mitigation costs		47.3			30.1			118.2			90.2
Income (loss) from mining operations		(3.2	)		3.5			(9.3	)		10.3
Loss and comprehensive loss	$	(68.5	)	$	(18.8	)	$	(202.5	)	$	(55.4	)
Loss and comprehensive loss per share	$	(2.18	)	$	(19.56	)	$	(18.04	)	$	(68.64	)
EBITDA ¹	$	(45.6	)	$	(4.1	)	$	(132.9	)	$	12.8
Adjusted EBITDA ¹	$	9.1		$	8.3		$	14.9		$	28.5
Capital spending	$	12.3		$	5.8		$	25.6		$	14.3

¹	Non-International Financial Reporting Standard (“IFRS”) measure. Please refer to Non-IFRS Measures on pages 20-21.

In the third quarter of 2015:

•

443,312 tonnes were mined from underground and processed from the low grade surface stockpile at an average grade of 3.5 grams per tonne palladium.

•

The mill processed 659,817 tonnes of ore at an average palladium head grade of 3.6 grams per tonne and a recovery of 83.4%. Head grade increased 50% over the third quarter of 2014 due to milling the underground stockpile that accumulated when the mill was shut down in the second quarter of 2015.

•

Payable palladium production was 57,914 ounces while payable palladium sales were 57,490 ounces.

•

Revenue increased by $18.3 compared to the third quarter of 2014 primarily due to more favorable exchange rates and higher head grades that resulted in increased metal production.

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North American Palladium Ltd.

•

Production costs and mine restoration and mitigation costs increased $14.8 to $44.9 compared to the third quarter of 2014 primarily due to milling 16% more tonnes, mining 17% more underground tonnes, unfavourable inventory and other cost movements, and increased power and reagents costs.

•

Adjusted EBITDA increased $0.8 to $9.1 compared to the third quarter of 2014.

•

A net loss of $68.5 was incurred which included a $28.3 loss on recapitalization, mine restoration costs and mitigation costs of $2.4, $10.8 of non-cash depreciation and amortization, and a $19.0 foreign exchange loss.

LDI OPERATING & FINANCIAL RESULTS

Operations at LDI consist of an underground mine accessed via shaft and ramp, an open pit (currently inactive), a substantial low grade surface stockpile and a mill with a processing capacity of approximately 15,000 tonnes per day. The primary underground deposits on the property are the Offset and Roby zones. During 2015, the mill ran on a full time basis at approximately 60% of capacity other than during the May 8, 2015 until June 26, 2015 period that the mill was shutdown. In the first six months of 2014, the mill was run on a batch basis. The mill shutdown in the second quarter of 2015 renders direct comparisons between 2015 and 2014 operating and financial results less informative.

Operating Results

The key operating results are set out in the following table.


	Three months ended September 30				Nine months ended September 30
	2015		2014		2015		2014
Ore mined (tonnes)
Underground		356,680		304,804		1,190,287		844,553
Surface		86,632		270,860		664,418		768,195

Total		443,312		575,664		1,854,705		1,612,748


Mined ore grade (Pd g/t)
Underground		4.1		4.0		4.1		4.6
Surface		1.3		1.1		1.1		1.0

Average		3.5		2.6		3.0		2.9


Milling
Tonnes of ore milled		659,817		566,494		1,747,379		1,604,483
Palladium head grade (g/t)		3.6		2.4		3.0		2.9
Palladium recoveries (%)		83.4		80.7		82.9		83.1
Tonnes of concentrate produced		6,968		4,135		16,519		13,834
Production cost per tonne milled, before mine restoration and mitigation costs	$	68	$	53	$	64	$	56

Payable production
Palladium (oz)		57,914		32,560		126,444		114,423
Platinum (oz)		4,138		2,506		9,854		8,227
Gold (oz)		3,590		2,266		7,893		7,757
Nickel (lbs)		325,700		321,761		1,019,752		1,096,865
Copper (lbs)		760,012		563,888		1,994,406		1,995,914
Cash cost per ounce of palladium sold (US$)¹	$	522	$	589	$	590	$	527

¹	Non-IFRS measure. Please refer to Non-IFRS Measures on pages 20-21.

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Mining

In the third quarters of 2015 and 2014, underground tonnes mined were blended with the low grade surface stockpile material for processing in the mill. Underground ore mined at LDI in the third quarter of 2015 consisted of 356,680 tonnes (3,877 tonnes per day) at an average grade of 4.1 g/t palladium compared to 304,804 tonnes (3,313 tonnes per day) at an average palladium grade of 4.0 g/t in the same period in the prior year. Underground tonnage mined was slightly lower than plan in the third quarter due to seismic activity in pillars adjacent to current mining activity. Although seismic activity is not unexpected in the mining plan the stoping sequence had to change and additional rehabilitation has been required. In the third quarter of 2015, 86,632 tonnes of the low grade surface stockpile and tailings at an average grade of 1.3 g/t palladium was processed compared to 270,860 tonnes at an average grade of 1.1 g/t in the prior year period. On a combined basis, 23% less tonnes of ore were mined and processed in the third quarter of 2015 at a 35% higher palladium grade compared to the same period in 2014.

In the first nine months of 2015, underground ore mined at LDI consisted of 1,190,287 tonnes (4,360 tonnes per day) at an average grade of 4.1 g/t palladium compared to 844,553 tonnes (3,094 tonnes per day) at an average palladium grade of 4.6 g/t in the prior year. In the first nine months of 2015, LDI processed 664,418 tonnes of the low grade surface stockpile and tailings at an average grade of 1.1 g/t (2014 - 768,195 tonnes at an average grade of 1.0 g/t).

Milling

During 2015, the mill ran on a full time basis at approximately 60% of capacity other than during the May 8, 2015 until June 26, 2015 period that the mill was shutdown. In the first nine months of 2014, the mill was run on a batch basis. The mill shutdown in the second quarter of 2015 renders direct comparisons between 2015 and 2014 operational results less informative.

During the three months ended September 30, 2015, the LDI mill processed 659,817 tonnes of ore at an average palladium head grade of 3.6 g/t palladium and a recovery of 83.4% to produce 57,914 ounces of payable palladium (compared to the results in the same period in 2014 – 566,494 tonnes milled, average palladium head grade of 2.4 g/t, recovery of 80.7%, producing 32,560 ounces of payable palladium). The mill shutdown in the second quarter of 2015 did not impact underground operations, resulting in the underground high grade stockpile accumulating to approximately 225,000 tonnes. When the mill restarted at the end of the second quarter, these additional tonnes, combined with ongoing underground production and some low grade surface stockpiles, resulted in the mill head grade increasing 50% over 2014 to 3.6 g/t.

During the nine months ended September 30, 2015, the LDI mill processed 1,747,379 tonnes of ore at an average palladium head grade of 3.0 g/t and a recovery of 82.9% to produce 126,444 ounces of payable palladium (2014 – 1,604,483 tonnes milled, average palladium head grade of 2.9 g/t, recovery of 83.1%, producing 114,423 ounces of payable palladium).

Production Costs per Tonne Milled

Production costs per tonne milled in the three and nine month periods ended September 30, 2015 were $68 and $64 respectively compared to $53 and $56 per tonne in the comparable 2014 periods. The increases were primarily due to higher costs associated with mining greater quantities of underground ore, reagent usage and increased power costs in 2015 compared to 2014 as well as the cost changes noted in the production cost increases described below.

Payable Production

Payable production for the three and nine months periods ended September 30, 2015 was higher for all payable metals, except for copper, compared to the same periods in 2014. The changes in payable metal production for the three and nine month periods ended September 30, 2015 compared to the respective periods in 2014 was primarily due to more tonnes milled, higher average head grades, and higher recoveries for all metals.

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Cash Cost per Ounce of Palladium Sold

Cash cost per ounce of palladium sold is a non-IFRS measure and the calculation is provided in the Non-IFRS Measures section of this MD&A.

The cash cost per ounce of palladium sold decreased to US$522¹ for the three months ended September 30, 2015 compared to US$589¹ in the same period in 2014. The cash cost per ounce of palladium sold increased to US$590¹ for the nine months ended September 30, 2015 compared to US$527¹ in the same period in 2014.

¹	Non-IFRS measure. Please refer to Non-IFRS Measures on pages 20-21.

Financial Results

Income from mining operations for the LDI operations is summarized in the following table.


	Three months ended September 30					Nine months ended September 30
($millions)	2015			2014		2015			2014
Gross revenue	$	64.7		$	46.4	$	156.0		$	145.7
Smelting, refining and freight costs		6.8			4.0		16.2			12.3
Royalty expense		2.7			1.8		6.2			6.1

Net revenue		55.2			40.6		133.6			127.3

Mining operating expenses
Production costs
Mining		19.9			17.0		64.7			52.9
Milling		9.9			7.3		27.5			22.5
General and administration		5.3			4.4		18.2			14.4

		35.1			28.7		110.4			89.8
Inventory and others		9.8			1.4		1.7			0.5
Mine restoration and mitigation costs		2.4			—		6.1			—

		47.3			30.1		118.2			90.3
Depreciation and amortization		10.8			6.9		24.0			25.4
Inventory price adjustment		—			—		0.5			—
Loss (gain) on disposal of equipment		0.3			0.2		0.2			1.4

Total mining operating expenses	$	58.4		$	37.2	$	142.9		$	117.1

Income (loss) from mining operations	$	(3.2	)	$	3.4	$	(9.3	)	$	10.2

The Company has included income from mining operations as an additional IFRS measure to provide the user with additional information on the actual results of the LDI operations.

Gross Revenue

Gross revenue is affected by production and sales volumes, commodity prices, currency exchange rates, timing of milling campaigns and shipment schedules. Metal sales for LDI are recognized in revenue at provisional prices when delivered to a smelter for treatment or a designated shipping point. Final pricing is determined in accordance with LDI’s smelter agreements. In most cases, final pricing is determined two months after delivery to the smelter for gold, nickel and copper and four months after delivery for palladium and platinum. Final pricing adjustments can result in additional revenues in a rising commodity price environment and reductions to revenue in a declining commodity price environment. Similarly, a weakening in the Canadian dollar relative to the U.S. dollar would have a positive impact on revenues and a strengthening in the Canadian dollar would have a negative impact on revenues.

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The Company periodically enters into forward contracts relating to payable metals contained in concentrate delivered to the smelters. These contracts mitigate the Company’s exposure to changes in both the palladium price and the Canadian dollar exchange rate between the time of delivery of the concentrate and the time of final settlement. These financial contracts represent nil ounces of palladium as at September 30, 2015 (December 31, 2014 – 12,800 palladium ounces at an average forward price of US$812 per ounce of palladium). For substantially all of the palladium delivered to the customers under the smelter agreements, the quantities and timing of settlement specified in the financial contracts match final pricing settlement periods. The palladium financial contracts are being recognized on a mark-to-market basis as an adjustment to revenue. The fair value of these contracts at September 30, 2015 was $nil compared to $0.2 at December 31, 2014.


Revenue for the three months ended September 30, 2015
	Palladium		Platinum			Gold		Nickel			Copper		Others		Total
Sales volume⁽¹⁾		57,490		4,154			3,568		328,340			761,064		n.a.		n.a.

Realized price (US$) ⁽¹⁾	$	667	$	1,038		$	1,164	$	5.58		$	2.59		n.a.		n.a.

Revenue before price adjustment	$	47.1	$	5.3		$	5.2	$	2.1		$	2.4	$	—	$	62.1
Price adjustment ($millions):
Commodities		0.8		(0.7	)		—		(0.1	)		—		—		—
Foreign exchange		1.9		0.4			0.2		0.1			—		—		2.6

Revenue ($million)	$	49.8	$	5.0		$	5.4	$	2.1		$	2.4	$	—	$	64.7

⁽¹⁾	Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper.


Revenue for the three months ended September 30, 2014
	Palladium			Platinum			Gold			Nickel			Copper			Others		Total
Sales volume⁽¹⁾		36,430			2,777			2,516			356,832			622,585			n.a.		n.a.

Realized price (US$) ⁽¹⁾	$	860		$	1,433		$	1,319		$	8.33		$	3.18			n.a.		n.a.

Revenue before price adjustment	$	34.1		$	4.3		$	3.5		$	3.2		$	2.1		$	—	$	47.2
Price adjustment ($millions):
Commodities		(2.1	)		(0.7	)		(0.1	)		(0.3	)		(0.1	)		—		(3.3	)
Foreign exchange		1.9			0.3			0.1			0.1			0.1			—		2.5

Revenue ($millions)	$	33.9		$	3.9		$	3.5		$	3.0		$	2.1		$	—	$	46.4

⁽¹⁾	Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper.


Revenue for the nine months ended September 30, 2015
	Palladium			Platinum			Gold		Nickel			Copper			Others		Total
Sales volume⁽¹⁾		126,593			9,941			7,894		1,035,320			2,018,993			n.a.		n.a.

Realized price (US$) ⁽¹⁾	$	746		$	1,132		$	1,200	$	6.33		$	2.72			n.a.		n.a.

Revenue before price adjustment	$	114.6		$	13.8		$	11.6	$	7.5		$	6.6		$	0.1	$	154.2
Price adjustment ($million):
Commodities		(4.2	)		(1.5	)		0.1		(0.3	)		(0.1	)		—		(6.0	)
Foreign exchange		5.7			0.9			0.6		0.4			0.2			—		7.8

Revenue ($millions)	$	116.1		$	13.2		$	12.3	$	7.6		$	6.7		$	0.1	$	156.0

⁽¹⁾	Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper.

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North American Palladium Ltd.


Revenue for the nine months ended September 30, 2014
	Palladium		Platinum			Gold		Nickel		Copper			Others		Total
Sales volume⁽¹⁾		116,631		8,380			7,915		1,094,717		2,038,907			n.a.		n.a.

Realized price (US$) ⁽¹⁾	$	806	$	1,432		$	1,296	$	7.61	$	3.15			n.a.		n.a.

Revenue before price adjustment	$	103.1	$	13.1		$	11.1	$	9.4	$	7.0		$	0.1	$	143.8
Price adjustment ($millions):
Commodities		0.6		(0.2	)		0.2		0.2		(0.2	)		—		0.6
Foreign exchange		0.7		0.2			0.1		0.1		0.1			—		1.2

Revenue ($millions)	$	104.4	$	13.1		$	11.4	$	9.7	$	6.9		$	0.1	$	145.6

⁽¹⁾	Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper.

Revenue for the three months ended September 30, 2015 increased by $18.3 or 39% compared to the third quarter of 2014 primarily due to 58% more ounces of palladium sold, a 6% favourable movement in the exchange rate and greater volumes of platinum (+50%), gold (+42%), and copper (+22%), partially offset by a decrease in all US$ metal prices realized. For the nine months ended September 30, 2015, revenues increased by $10.4 or 7% primarily due to 9% more ounces of palladium sold, a 13% favourable exchange rate movement and 19% greater volumes of platinum, partially offset by lower realized US$ prices for all metals.

Spot Metal Prices* and Exchange Rates

For comparison purposes, the following table sets out spot metal prices and exchange rates.


	Sep-30 2015		Jun-30 2015		Mar-31 2015		Dec-31 2014		Sep-30 2014		Jun-30 2014		Mar-31 2014		Dec-31 2013
Palladium – US$/oz	$	661	$	677	$	729	$	798	$	775	$	844	$	778	$	711
Platinum – US$/oz	$	908	$	1,078	$	1,129	$	1,210	$	1,300	$	1,480	$	1,418	$	1,358
Gold – US$/oz	$	1,114	$	1,171	$	1,187	$	1,199	$	1,217	$	1,315	$	1,292	$	1,202
Nickel – US$/lb	$	4.57	$	5.30	$	5.65	$	6.77	$	7.49	$	8.49	$	7.14	$	6.34
Copper – US$/lb	$	2.30	$	2.61	$	2.73	$	2.85	$	3.03	$	3.15	$	3.01	$	3.34

Exchange rate (Bank of Canada) – CDN$1 = US$	US$	0.75	US$	0.80	US$	0.79	US$	0.86	US$	0.89	US$	0.94	US$	0.90	US$	0.94

*	Based on the London Metal Exchange

Smelting, refining and freight costs

Smelting, refining and freight costs for the three and nine month periods ended September 30, 2015 were $6.8 and $16.2 compared to $4.0 and $12.3 in the respective 2014 periods. The increases over the prior year are primarily due to the impact of a weaker Canadian dollar and more tonnes of concentrate shipped.

Royalty expense

For the three and nine month periods ended September 30, 2015, royalty expenses were $2.7 and $6.2 compared to $1.8 and $6.1 in the respective 2014 periods. The increases in 2015 were primarily due to higher revenues in 2015 compared to the respective 2014 periods.

Production costs

For the three and nine months ended September 30, 2015, production costs were $47.3 and $118.2 compared to $30.1 and $90.3 in 2014 respectively. Production costs for the three and nine month periods ended September 30, 2015 include $2.7 and $6.1 of mine restoration and mitigation costs, respectively.

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Mining costs for the three and nine month periods ended September 30, 2015 increased by $2.9 (17%) and $11.8 (22%) respectively compared to the 2014 periods. The increases were primarily due to 17% and 41% more underground tonnes mined respectively in the three and nine month periods ended September 30, 2015, and increased costs associated with contractors, parts and labour partially offset by lower costs for propane and equipment rentals.

For the three month period ended September 30, 2015, milling costs increased $2.6 (36%) while for the nine month ended September 30, 2015, milling costs increased $5.0 (22%) compared to the respective 2014 periods. These changes were primarily due to milling 16% more tonnes due to running the mill on a full time basis, increased reagent use, parts, power, and higher labour and contractor costs.

For the three and nine months ended September 30, 2015, general and administration costs increased $0.9 and $3.8 compared to the same periods in 2014, primarily due to consultant costs, camp catering costs, and severance payments.

Inventory and other costs increased production costs by $9.8 and $1.7 for the three and nine month periods ended September 30, 2015 compared to $1.4 and $0.5 respectively in 2014 periods for net changes of $8.4 and $1.2. These net changes were primarily due to the drawdown of the underground inventory stockpile that was built up in the second quarter of 2015 when the Company ceased milling operations from May 11 to June 26.

Depreciation and amortization

Depreciation and amortization for the three and nine months ended September 30, 2015 were $10.8 and $24.0 respectively, compared to $6.9 and $25.4 in the comparable 2014 periods. The 2015 increases over the prior year periods were primarily due to higher unit of production depletion related to higher production and more tonnes mined partially offset by an increased reserve and resource base.

OTHER EXPENSES

Exploration

Exploration expenditures for the three and nine month periods ended September 30, 2015 were $1.3 and $5.6 respectively compared to $2.6 and $5.2 in the respective 2014 periods. The changes were primarily due to an early start to the 2015 exploration program and a subsequent curtailment of the program in light of budget reductions.

General and administration

General and administration expenditures for the three and nine month periods ended September 30, 2015 were $4.6 and $9.6 respectively compared to $2.1 and $7.3 in the respective 2014 periods. The increases were primarily due to severance payments in the current period.

Interest and other income

Interest and other income for the three and nine months periods ended September 30, 2015 were $0.1 and $1.1 respectively compared to $1.5 and $3.9 in the comparable prior year periods. The decreases were primarily due to decreases in fair value changes of warrants associated with the convertible debentures issued in 2014.

Interest costs, prepayment fee and other

Interest costs, prepayment fee and other for the three and nine month periods ended September 30, 2015 were $10.0 and $103.4 respectively compared to $10.2 and $39.2 in the comparable prior year periods. The decrease of $0.2 for the three months ended September 2015 was primarily due to a decrease in interest expense as a result of the senior secured term loan that was settled as part of the recapitalization. The increase of $64.2 for the nine months ended September 2015 was primarily due to changes in the carrying value of the senior secured term loan that was settled as part of the recapitalization transaction that closed in August 2015.

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Financing costs

For the three and nine month periods ending September 30, 2015, financing costs were $2.2 and $10.1 compared to a recovery of $0.9 and cost of $7.5 in the comparable 2014 periods. The 2015 amounts were primarily due to financing costs related to the Recapitalization agreement, waiver fees, bridge loan and interim facility financing, while the 2014 amounts primarily related to the issuance of the 2014 convertible debentures.

Loss on recapitalization

On June 18, 2015, the Company entered into the Recapitalization agreement with Brookfield. On July 30, 2015, the recapitalization arrangement received shareholder approval and was completed on August 6, 2015, resulting in the cancellation of all outstanding options and warrants and the conversion of certain debt amounts owing to Brookfield, the 2012 and 2014 convertible debentures, and outstanding restricted share units into equity. At the time of the recapitalization, the Company issued 19,404,572,359 common shares with a fair value of $388.1 to settle debt and other amounts with an aggregate carrying value of $359.8, resulting in a loss on recapitalization of $28.3 being recorded in the Condensed Interim Consolidated Statements of Operations and Comprehensive Loss.

Foreign exchange loss

Foreign exchange loss for the three and nine month periods ended September 30, 2015 was $19.0 and $37.3 respectively compared to $9.8 and $10.5 in comparable 2014 periods. The 2015 and 2014 losses were primarily due to the impact of exchange rate movements on the US$ denominated senior secured term loan and the US$ denominated credit facility.

SUMMARY OF QUARTERLY RESULTS

Summary of Quarterly Results


($millions except per share amounts)	2015									2014												2013
	Q3			Q2			Q1			Q4			Q3			Q2			Q1			Q4
Revenue	$	64.7		$	27.3		$	64.0		$	74.5		$	46.4		$	50.5		$	48.7		$	39.6
Production costs, including mine restoration and mitigation costs		47.3			29.3			41.6			40.5			30.1			30.3			29.7			29.9
Exploration expense		1.3			1.8			2.5			3.1			2.5			1.9			0.8			1.4
Capital expenditures		12.3			7.8			5.6			9.5			5.8			5.6			2.9			16.7
Net loss		68.5			96.8			37.3			11.3			18.8			10.0			26.7			11.7
Cash provided by (used in) operations		(14.0	)		6.4			20.7			1.0			8.0			(3.8	)		(16.8	)		4.2
Cash provided by (used in) financing activities		21.2			11.6			(8.8	)		0.7			(34.7	)		31.6			31.8			4.3
Cash provided by (used in) investing activities		(12.3	)		(7.2	)		(5.6	)		(9.5	)		(5.8	)		(5.4	)		(2.9	)		(16.7	)
Net loss per share
– basic and diluted	$	(2.18	)	$	(98.35	)	$	(38.18	)	$	(11.70	)	$	(19.56	)	$	(11.44	)	$	(45.86	)	$	(23.76	)
Tonnes milled		443,312			336,142			751,420			1,080,299			566,494			521,478			516,511			544,074
Palladium sold (ounces)		57,490			23,974			45,129			57,256			36,430			40,716			39,485			35,205
Realized palladium price (US$/ounce)	$	667		$	758		$	786		$	787		$	860		$	806		$	739		$	725

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Trends:

•

Revenue, production costs, tonnes milled and palladium ounces sold, varied over the last eight quarters as mining has transitioned from the Roby zone underground and the surface open pit to the Offset zone underground and surface stockpiles. The mill shutdown in the second quarter of 2015 did not impact underground operations, resulting in a stockpile of underground ore that was fed into the mill when it restarted at the end of the second quarter, which significantly increased the average palladium head grade, impacting revenue realized, ore milling and palladium ounces produced.

•

Realized quarterly average prices for palladium have ranged from US$667 to US$860 per ounce in the last eight quarters while US$ prices for platinum, gold, copper and nickel have generally been declining over the last five quarters. The weakening of the Canadian dollar versus the United States dollar generally results in higher revenues.

•

Capital expenditures have primarily related to sustaining capital for the last eight quarters, and in Q3 2015 expansion of the tailings management facility.

•

Cash provided by financing activities in Q2 2015 was primarily due to a US$25 credit facility provided by the senior secured term loan lender that was fully utilized in the quarter and the Q1 and Q2 2014 sources were primarily due to the issuance of convertible debentures. The use of funds in Q3 2014 was primarily due to a partial repayment of the senior secured term loan.

FINANCIAL CONDITION, CASH FLOWS, LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash


	Three months ended September 30						Nine months ended September 30
($millions)	2015			2014			2015			2014
Cash provided by (used in) operations prior to changes in non-cash working capital	$	(2.0	)	$	4.5		$	0.1		$	23.2
Changes in non-cash working capital		(12.0	)		3.5			13.1			(35.7	)

Cash provided by (used in) operations		(14.0	)		8.0			13.2			(12.5	)
Cash provided by financing activities		21.2			(34.7	)		23.8			28.6
Cash used in investing activities		(12.3	)		(5.8	)		(25.0	)		(14.1	)

Increase (decrease) in cash and cash equivalents	$	(5.1	)	$	(32.5	)	$	12.0		$	2.0

Operating Activities

For the three months ended September 30, 2015, cash used in operations prior to changes in non-cash working capital was $2.0 compared to a source of cash of $4.5 in the prior year period. The 2015 decrease of $6.5 was primarily due to a $14.8 increase in production costs, $3.7 increase in smelting, refining, freight and royalty costs, $2.4 increase in mine restoration and mitigation costs, and a $2.5 increase in general and administration, partially offset by an $18.3 increase in revenue. For the nine months ended September 30, 2015, cash sourced by operations prior to changes in non-cash working capital was $0.1 compared to $23.2 in the prior year. The 2015 decrease of $23.1 was primarily due to a $21.9 increase in production costs, $6.1 increase in mine restoration and mitigation costs, and a $2.3 increase in general and administration, partially and a $4.1 increase in smelting, refining, freight and royalty costs, partially offset by an $10.3 increase in revenue.

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North American Palladium Ltd.

Changes in non-cash working capital for the three months ended September 30, 2015 resulted in a use of cash of $12.0 compared to a source of cash of $3.5 in the same period ended 2014. The 2015 decrease of $15.5 was primarily due to unfavourable movements in accounts receivable of $23.5 and accounts payable and accrued liabilities of $1.7, partially offset by favourable movements in inventories of $8.1 and other assets of $1.7. Changes in non-cash working capital for the first nine months of 2015 resulted in a source of cash of $13.1 compared to a use of cash of $35.7 in 2014. The 2015 increase of $48.8 was primarily due to favourable movements in accounts receivable of $28.4 and accounts payable and accrued liabilities of $23.8 partially offset by an unfavourable movements in other assets of $4.4.

Financing Activities and Liquidity

For the three months ended September 30, 2015, financing activities resulted in a source of cash of $21.2 compared to a use of cash of $34.7 in the comparable 2014 period. The $55.9 increase was primarily due to $49.6 net proceeds received from the rights offering, reduction in interest paid of $27.7, partially offset by a $17.6 repayment of the bridge loan. For the nine months ended September 30, 2015, financing activities resulted in a source of cash of $23.8 compared to $28.6 for the comparable period. The $4.8 decrease is primarily due to an increase of $9.2 other financing costs, partially offset by $49.6 net proceeds received from the rights offering, $16.3 net drawdown of credit facilities and a decrease of $6.2 interest paid, compared to $61.2 of net proceeds from convertible debentures issued (that have been converted to equity).

Investing Activities

For the three and nine month periods ended September 30, 2015, investing activities used cash of $12.3 and $25.0 respectively compared to $5.8 and $14.1 in the comparable 2014 periods. The expenditures in 2015 and 2014 were due to additions to mining interests.

Liquidity and Capital Resources¹


($millions)	As at September 30 2015		As at December 31 2014
Cash and cash equivalents	$	16.1	$	4.1
Total debt		43.7		281.7
Shareholders’ equity		462.1		224.4

¹	Also see critical accounting policies and estimates, going concern section of this MD&A.

As at September 30, 2015, the Company had cash and cash equivalents of $16.1 compared to $4.1 as at December 31, 2014. The change from the prior year end is due to the sources and uses of cash as noted above. The funds are deposited with major Canadian chartered banks.

The Company has, subject to a borrowing base cap, a US$60.0 credit facility that is secured by first priority on the Company’s accounts receivable and inventory and second priority on the property, plant and equipment and may be used for working capital liquidity and general corporate purposes. In July 2014, the Company extended its US$60 credit facility to July 3, 2015 and the facility was further extended to November 30, 2015. As at September 30, 2015, the borrowing base calculation limited the credit facility to a maximum of US$35.1 of which US$33.0 was utilized including US$12.3 of letters of credit.

The Company’s credit facility contains several financial covenants which, if not met, would result in an event of default. This loan also includes certain other covenants, including limits on liens, additional debt, payments, material adverse change provisions and cross-default provisions. Certain events of default result in this loan becoming immediately due. Other events of default entitle the lender to demand repayment.

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The Company’s liquidity may be adversely affected by operating performance, a downturn in market conditions impacting access to capital markets or entity specific conditions. The Company’s liquidity is dependent on a number of variables including, but not limited to, metal prices, operational costs, capital expenditures, and meeting production targets. Adverse changes in any of these variables may impact the Company’s liquidity position.

At March 31, 2015, the Company received waivers with respect to the current ratio, minimum shareholders’ equity and senior debt to EBITDA ratio covenants, and subsequently received amendments waiving future covenant compliance for the April, May, June and July 2015 compliance tests, subject to certain conditions. Please also see the recapitalization transaction section of this MD&A. At September 30, 2015, the Company was in compliance with all covenants.

The Company has $15.9 of finance leases funding equipment for operations. Please also see the contractual obligations below for additional commitments.

Contractual Obligations

Contractual obligations are comprised as follows:


As at September 30, 2015	Payments Due by Period
($millions)	Total		1-3 Years		3-5 Years		5+ Years
Credit facility	$	27.8	$	27.8	$	—	$	—
Finance lease obligations		15.9		13.4		2.5		—
Operating leases		2.6		2.6		—		—
Purchase obligations		8.8		8.8		—		—

	$	55.1	$	52.6	$	2.5	$	—

In addition to the above, the Company has asset retirement obligations at September 30, 2015 in the amount of $16.5 for the LDI mine and contractual obligations reflected in accounts payable. The Company obtained letters of credit of $14.8 related to the asset retirement obligation.

Commitments

Please refer to note 14 of the Company’s Financial Statements.

Related Party Transactions

There were no related party transactions for the period ended September 30, 2015.

OUTSTANDING SHARE DATA

As of November 5, 2015, there were 58,126,526 common shares of the Company outstanding.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies generally include estimates that are highly uncertain and for which changes in those estimates could materially impact the Company’s financial statements. The following accounting policies are considered critical:

a.	*Going Concern*

These condensed interim consolidated financial statements have been prepared on a going concern basis which contemplates that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. The Company’s credit facility (note 9), which was almost fully drawn on September 30, 2015, expires on November 30, 2015. The Company utilizes its credit facility as needed to both supplement shortfalls in cash flow from operations and to fund certain capital expenditures, and as a result the Company will need to renew or replace its credit facility. The Company’s credit facility contain several financial covenants, which, if not met would result in an event of default. Certain events of default entitle the lender to demand repayment.

b.	*Use of estimates*

The preparation of the condensed interim consolidated financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed interim consolidated financial statements and the reported amounts of revenue and expenses during the year. Significant estimates and assumptions relate to recoverability of mining operations and mineral exploration properties. While management believes that these estimates and assumptions are reasonable, actual results could vary significantly.

Certain assumptions are dependent upon reserves, which represent the estimated amount of ore that can be economically and legally extracted from the Company’s properties. In order to estimate reserves, assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transportation costs, commodity prices and exchange rates. Estimating the quantity and/or grade of reserves requires the size, shape and depth of ore bodies to be determined by analyzing geological data such as drilling samples. This process may require complex and difficult geological judgments to interpret the data. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period they are determined and in any future periods affected.

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Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data is generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the Company’s financial results and financial position in a number of ways, including the following:

•

Asset carrying values including mining interests may be affected due to changes in estimated future cash flows;

•

Depreciation and amortization charged in the statement of operations may change or be impacted where such charges are determined by the units of production basis, or where the useful economic lives of assets change;

•

Decommissioning, site restoration and environmental provisions may change where changes in estimated reserves affect expectations about the timing or cost of these activities; and,

•

The carrying value of deferred tax assets may change due to changes in estimates of the likely recovery of the tax benefits.

c.	*Impairment assessments of long-lived assets*

The carrying amounts of the Company’s non-financial assets, excluding inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. Impairment is assessed at the level of cash-generating units (“CGUs”). An impairment loss is recognized in the Consolidated Statements of Operations and Comprehensive Loss for any excess of carrying amount over the recoverable amount.

Impairment is determined for an individual asset unless the asset does not generate cash inflows that are independent of those generated from other assets or groups of assets, in which case, the individual assets are grouped together into CGUs for impairment purposes.

The recoverable amount of an asset or CGU is the greater of its “value in use”, defined as the discounted present value of the future cash flows expected to arise from its continuing use and its ultimate disposal, and its “fair value less costs to sell”, defined as the best estimate of the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognized in the Consolidated Statements of Operations and Comprehensive Loss if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss on non-financial assets other than goodwill is reversed if there has been a change in the estimates used to determine the recoverable amount, only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recognized.

d.	*Depreciation and amortization of mining interests*

Mining interests relating to plant and equipment, mining leases and claims, royalty interests, and other development costs are recorded at cost with depreciation and amortization provided on the unit-of-production method over the estimated remaining ounces of palladium to be produced based on the proven and probable reserves or, in the event that the Company is mining resources, an appropriate estimate of the resources mined or expected to be mined.

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Mining interests relating to small vehicles and certain machinery with a determinable expected life are recorded at cost with depreciation provided on a straight-line basis over their estimated useful lives, ranging from three to seven years, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Straight-line depreciation is calculated over the depreciable amount, which is the cost of an asset, less its residual value.

Significant components of individual assets are assessed and, if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately using the unit-of-production or straight-line method as appropriate. Costs relating to land are not amortized.

Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

e.	*Revenue recognition*

Revenue from the sale of metals in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of volume adjustments. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale.

Revenue from the sale of palladium and by-product metals from the LDI mine is provisionally recognized based on quoted market prices upon the delivery of concentrate to the smelter or designated shipping point, which is when title transfers and significant rights and obligations of ownership pass. The Company’s smelter contract provides for final prices to be determined by quoted market prices in a period subsequent to the date of concentrate delivery. Variations from the provisionally priced sales are recognized as revenue adjustments until final pricing is determined. Accounts receivable are recorded net of estimated treatment and refining costs, which are subject to final assay adjustments. Subsequent adjustments to provisional pricing amounts due to changes in metal prices and foreign exchange are disclosed separately from initial revenues in the notes to the financial statements.

f.	*Asset retirement obligations*

In accordance with Company policies, asset retirement obligations relating to legal and constructive obligations for future site reclamation and closure of the Company’s mine sites are recognized when incurred and a liability and corresponding asset are recorded at management’s best estimate. Estimated closure and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs.

The amount of any liability recognized is estimated based on the risk-adjusted costs required to settle present obligations, discounted using a pre-tax risk-free discount rate consistent with the time period of expected cash flows. When the liability is initially recorded, a corresponding asset retirement cost is recognized as an addition to mining interests and amortized using the unit of production method.

The liability for each mine site is accreted over time and the accretion charges are recognized as an interest cost in the Consolidated Statements of Operations and Comprehensive Loss. The liability is subject to re-measurement at each reporting date based on changes in discount rates and timing or amounts of the costs to be incurred. Changes in the liability, other than accretion charges, relating to mine rehabilitation and restoration obligations, which are not the result of current production of inventory, are added to or deducted from the carrying value of the related asset retirement cost in the reporting period recognized. If the change results in a reduction of the obligation in

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excess of the carrying value of the related asset retirement cost, the excess balance is recognized as a recovery through profit or loss in the period.

Adoption of New Accounting Standards

There have been no new accounting standards adopted by the Company for the nine month period ended September 30, 2015.

New standards not yet adopted

The following new standards or amendments to standards are not yet effective for the period ended September 30, 2015 or have otherwise not yet been adopted by the Company.

IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortization

IFRS 15 Revenue from contracts with customers

IFRS 9 Financial Instruments: Classification and Measurement

On July 24, 2014, the IASB issued the complete IFRS 9 (IFRS 9 (2014)) which will replace IAS 39, Financial Instruments: Recognition and Measurement.

Special transitional requirements have been set for the application of the new general hedging model.

OTHER INFORMATION

Additional information regarding the Company is included in the Company’s Form 40-F/Annual Information Form, which are filed with the SEC and the provincial securities regulatory authorities, respectively. A copy of the Company’s Form 40-F can be obtained from the SEC’s website at www.sec.gov and a copy of the Annual Information Form is posted on the SEDAR website at www.sedar.com.

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RISKS AND UNCERTAINTIES

In addition to the risks and uncertainties discussed within the Company’s most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities, the reader should also consider the following risk factors:

Going Concern Risk – Please see the recapitalization transaction and going concern sections of this MD&A.

Liquidity Risk – Please see the liquidity and capital resources section of this MD&A.

Financing Risk – Please see the recapitalization transaction and going concern sections of this MD&A.

INTERNAL CONTROLS

Disclosure Controls and Procedures

Management is responsible for the information disclosed in this MD&A and has in place the appropriate information systems, procedures and controls to ensure that information used internally by management and disclosed externally is, in all material respects, complete and reliable.

For the nine month period ended September 30, 2015, the Chief Executive Officer and Interim, Vice President and Chief Financial Officer certify that they have designed, or caused to be designed under their supervision, disclosure controls and procedures to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.

The disclosure controls and procedures are evaluated annually through regular internal reviews which are carried out under the supervision of, and with the participation of, the Company’s management, including the Chief Executive Officer and Interim, Vice President and Chief Financial Officer.

Internal Control over Financial Reporting

For the nine month period ended September 30, 2015, the Chief Executive Officer and Interim, Vice President and Chief Financial Officer certify that they have designed, or caused to be designed under their supervision, internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with IFRS as issued by the IASB.

On August 6, 2015, the Company completed a recapitalization arrangement which involved the conversion of a significant portion of its debt for shares. As a result of the recapitalization, the Company ownership changed with Brookfield acquiring a 92% equity interest in the Company. Subsequent to this recapitalization, a change in corporate management occurred. The nature of the change in corporate management did not impact changes in the Company’s internal controls over the financial reporting that may have either materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting during the most recent nine month period ended September 30, 2015.

Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Internal control over financial reporting, no matter how well designed, has inherent limitations and can only provide reasonable assurance, not absolute assurance, with respect to the preparation and fair presentation of published financial statements and management does not expect such controls will prevent or detect all misstatements due to error or fraud. The Company is continually evolving and enhancing its systems of controls and procedures.

Under the supervision and with the participation of the Chief Executive Officer and the Interim, Vice President and Chief Financial Officer, management performs regular internal reviews and conducts an annual evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013).

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NON-IFRS MEASURES

This MD&A refers to cash cost per ounce, EBITDA and adjusted EBITDA which are not recognized measures under IFRS. Such Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Management uses these measures internally. The use of these measures enables management to better assess performance trends. Management understands that a number of investors, and others who follow the Company’s performance, assess performance in this way. Management believes that these measures better reflect the Company’s performance and are better indications of its expected performance in future periods. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

The following tables reconcile these non-IFRS measures to the most directly comparable IFRS measures:

Cash Cost Per Ounce of Palladium

The Company uses this measure internally to evaluate the underlying operating performance of the Company for the reporting periods presented. The Company believes that providing cash cost per ounce allows the ability to better evaluate the results of the underlying business of the Company.

Cash cost per ounce include mine site operating costs such as mining, processing, administration and royalties, but are exclusive of depreciation, amortization, reclamation, capital and exploration costs. The cash cost per ounce calculation is reduced by any by-product revenue and is then divided by ounces of palladium sold to arrive at the by-product cash cost per ounce of palladium sales. This measure, along with revenues, is considered to be a key indicator of a Company’s ability to generate operating earnings and cash flow from its mining operations.

The Company’s primary operation relates to the extraction of palladium metal. Therefore, all other metals extracted in conjunction with the palladium metal are considered to be a by-product credit for the purposes of the cash cost calculation.

Reconciliation of Palladium Cash Cost per Ounce


			For the three months ended								For the nine months ended September 30
($millions except ounce and per ounce amounts)	Sep 30 2015		Jun 30 2015		Mar 31 2015		Dec 31 2014		Sep 30 2014		2015		2014
Production costs including overhead	$	44.9	$	25.6	$	41.6	$	40.5	$	30.1	$	112.1	$	60.1
Smelting, refining and freight costs		6.8		2.7		6.7		6.7		4.0		16.2		8.3
Royalty expense		2.7		1.0		2.5		3.0		1.8		6.2		4.3

Operational expenses		54.4		29.3		50.8		50.2		35.9		134.5		72.7
Less by-product metal revenue		14.9		7.1		18.0		19.5		12.5		39.9		28.7

	$	39.5	$	22.2	$	32.8	$	30.7	$	23.4		94.6	$	44.0

Divided by ounces of palladium sold		57,490		23,974		45,129		57,256		36,430		126,593		80,201
Cash cost per ounce (CDN$)	$	687	$	926	$	727	$	537	$	642	$	747	$	548
Average exchange rate (CDN$1 – US$)		0.76		0.81		0.81		0.88		0.92		0.79		0.91

Cash cost per ounce (US$), net of by-product credits	$	522	$	750	$	589	$	473	$	589	$	590	$	498

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North American Palladium Ltd.

Adjusted EBITDA

The Company believes that EBITDA and Adjusted EBITDA are valuable indicators of the Company’s ability to generate operating cash flow to fund working capital needs, service debt obligations, and fund capital expenditures.

EBITDA excludes the impact of the cost of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS.

Other companies may calculate EBITDA differently. Adjusted EBITDA is a non-IFRS financial measure, which excludes the following from loss: change in carrying value of long-term debt; income and mining tax expense; interest and other income; interest costs, prepayment fee and other; financing costs; depreciation and amortization; exploration; foreign exchange loss (gain); loss on recapitalization; mine restoration and mitigation costs; and, severance payments.


	For the three months ended															For the nine months ended September 30
($millions)	Sep 30 2015			Jun 30 2015			Mar 31 2015			Dec 31 2014			Sep 30 2014			2015			2014

Loss and comprehensive loss for the period	$	(68.5	)	$	(96.8	)	$	(37.3	)	$	(11.2	)	$	(18.8	)	$	(202.5	)	$	(36.6	)
Interest and other income		(0.1	)		(2.4	)		1.3			(0.5	)		(1.5	)		(1.1	)		(2.4	)
Interest costs, prepayment fee and other		10.0			14.8			11.9			10.1			10.2			36.6			29.0
Financing costs		2.2			7.5			0.4			—			(0.9	)		10.1			8.4
Depreciation and amortization		10.8			4.6			8.6			12.2			6.9			24.0			18.5

EBITDA	$	(45.6	)	$	(72.3	)	$	(15.0	)	$	10.6		$	(4.1	)	$	(132.9	)	$	16.9
Exploration		1.3			1.8			2.5			3.1			2.6			5.6			2.6
Foreign exchange loss (gain)		19.0			(4.0	)		22.4			7.9			9.8			37.3			0.6
Mine restoration and mitigation costs		2.4			3.7			—			—			—			6.1			—
Severance payments		3.7			—			—			—			—			3.7			—
Change in carrying value of long-term debt		—			66.8			—			—			—			66.8			—
Loss on recapitalization		28.3			—			—			—			—			28.3			—

Adjusted EBITDA	$	9.1		$	(4.0	)	$	9.9		$	21.6		$	8.3		$	14.9		$	20.1

Exhibit 4

FORM 52-109F2

Certification of Interim Filings

Full Certificate

I, Jim Gallagher, President & Chief Executive Officer, North American Palladium Ltd., certify the following:

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of North American Palladium Ltd. (the “issuer”) for the interim period ended September 30, 2015.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b)

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1	Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2	ICFR -material weakness relating to design: N/A

5.3	Limitation on scope of design: N/A

6.	Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2015 and ended on September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: November 6, 2015

/s/ Jim Gallagher

Jim Gallagher

President & Chief Executive Officer

Exhibit 5

FORM 52-109F2

Certification of Interim Filings

Full Certificate

I, Christine Napierala, Interim Chief Financial Officer, North American Palladium Ltd., certify the following:

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of North American Palladium Ltd. (the “issuer”) for the interim period ended September 30, 2015.

5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

(b)

5.1	Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2	ICFR -material weakness relating to design: N/A

5.3	Limitation on scope of design: N/A

6.	Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2015 and ended on September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: November 6, 2015

/s/ Christine Napierala

Christine Napierala,

Interim Chief Financial Officer

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